Answer:
1) 10,600
2) 20.75%
3) 25.40%
Explanation:
F0 -34,600
cost savings: $6,200
additional revenue 2,200 x $2 = $4,400
total cash inflow: $ 10,600
We use the IRR function i excel to solve for this
we have 6 years a postive income for 10,600 while F0 is -34,600
IRR refers to the rate at which the net present value is zero.
=IRR({-34600,10600,10600,10600,10600,10600,10600})
wedo the same but incease the last year cash flow by 14,000
=IRR({-34600,10600,10600,10600,10600,10600,24600})