Dandy's Fun Park is evaluating the purchase of a new game to be located on its Midway. Dandy's has narrowed their choices down to two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about the two choices follows. Using the net present value model, which alternative(s)should Family Fun Park select?
Present Value of $1
Present Value of Annuity of $1

Question

Dandy's Fun Park is evaluating the purchase of a new game to be located on its Midway. Dandy's has narrowed their choices down to two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about the two choices follows.  Using the net present value model, which alternative(s)should Family Fun Park select?
Present Value of $1
 Present Value of Annuity of $1

Quizplus · Accepted Answer

Calculating the net present value (NPV) for each game, we get:

Wacky Water Race game: 
NPV = -$10,000 + ($5,000 x 3.7908) 
NPV = $8,954

Whack-A-Mole game: 
NPV = -$15,000 + ($8,000 x 3.7908) 
NPV = $11,871

Based on these calculations, the Whack-A-Mole game has a higher NPV and therefore should be selected. The Wacky Water Race game has a positive NPV, but it is lower than the Whack-A-Mole game. Therefore, only the Whack-A-Mole game should be selected.

Dandy's Fun Park Is Evaluating the Purchase of a New