Answer:
Internal Rate of Return is 10%
Explanation:
The question is asking for the Internal Rate of Return for Lisun Company's new Production system.
What should be calculated at this point is the Present Value for the Internal Rate of Return
= Cost of Investment/ The Net Cash Savings per year
Cash Investment= $4, 607,200
Net Cash Savings: $800,000
The PV of IRR = $4,607,200/ $800,000
= 5.759
Since, the PV factor is 5.759, we need to look up the Present Value and Future Value table. Checking the 9 year column, the 5.759 is related to the discount rate of 10%.
Therefore, Internal Rate of Return is 10%