Integrative-Multiple IRRs Froogle Enterprises is evaluating an unusual investmen

Question

Integrative-Multiple IRRs Froogle Enterprises is evaluating an unusual investment project. What makes the project unusual is the stream of cash inflows and outflows shown in the following table: Why is it difficult to calculate the payback period for this project? Calculate the investment's net present value at cash of the following discount rates: 0%, 5%, 10%, 15%, 20%, 25%, 30%, 35%. What does your answer to part b tell you about this project's IRR? Should Froogle invest in this project if its cost of capital is 5%? What if the cost of capital is 15%? In general, when faced with a project like this, how should a firm decide whether to invest in the project or reject it?

Explanation / Answer

Hi, If you like my answer rate me lifesaver first...that way only I can earn points. Thanks Year Cash Flow Year 0 180000 Year 1 -828000 Year 2 1423800 Year 3 -1084680 Year 4 308880 0% NPV @0%= 0.00 5% NPV @5%= -13.88 10% NPV @10%= 0.00 15% NPV @15%= 5.79 20% NPV @20%= 0.00 25% NPV @25%= -6.91 30% NPV @30%= 0.00 35% NPV @35%= 35.56 a) Because of unconventional cash flows (negative cash flows in between) c) This project has multiple IRRs d) at 5% Froggie should not (NPV

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