Wesfarmers, an Australian conglomerate, is considering investing in a project that has the following unusual cash flow pattern.

a. Calculate the project’s NPV at each of the following discount rates: 0%, 5%, 10%, 20%, 30%, and 50%.

b. What do the calculations tell you about this project’s IRR? The IRR rule tells managers to invest if a project’s IRR is greater than the cost of capital. If Wesfarmers’ cost of capital is 12%, should it accept or reject this investment?

c. According to you, what is the best way to make decisions for projects with unusual cash flows?

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Year (t) 0 1 2 ne 3 4 5 CF, A$1,000 -2,000 3,500 -1,050 100 -2,600