Refer to the information in Exercise 26-17. Create an Excel spreadsheet to compute the internal rate of return for the proposed investment.
Data From Exercise 26-17
OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $500,000 per year in direct labor costs. The company requires a 10% return from its investments.
a. Compute the proposed investment’s net present value.
b. Using the answer from part a, is the investment’s internal rate of return higher or lower than 10%?
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