P10-26: Froogle Enterpises is evaluating an unusual investment project
P10-26: Froogle Enterpises is evaluating an unusual investment project. What makes the project unusual is the stream of cash inflows and outflows shown in the following table.Year Cash flow0 $200,0001 -920,0002 1,582,0003 -1,205,0004 343,200a. Why is it difficult to calculate the payback period for this project?b. Calculate the investment’s net present value at each of the following discount rates: 0%, 5%, 10%,20%, 25%, 30%, 35%.c. What does your answer to part b tell you about this project’s IRR?d. Should Froogle invest in this project if it’s cost of capital is 5%? What if the cost of capital is 15%?e. In general, when faced with a project like this one, how should a firm decide whether to invest in the project or reject it?Please provide your own work. Thanks.
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