Based on ALL THIS INFORMATION ---What is the Internal Rate of Return?

Garrison Appliances, Inc. is considering expanding its international presence. It sells 25% of all the toaster ovens sold in the United States, but only 3% of the toaster ovens sold outside of the United States. The company believes that it can sell more of its product if it has a production facility located overseas. Estimates concerning two possible locations, Mumbai and Bangalore, follow:

Bangalore:

Years 1-20

	Net Income	Cash Flow
Annual cash savings	$860,000	+$860,000
Depreciation($2,800,000/20)	140,000
Income before tax	$720,000
Tax, 40%	288,000	-288,000
Net Income	$432,000
Annual Net cash flow		$572,000

Average rate of return on investment: Average Investment is (280,000) / 2 = $140,000 (432,000) / $140 ,000 =0.31

Payback period: 280,000 / 572,000 = 4.9 years

Net present value:

Year	Explanation	Amount Factor =	Present Value
0	Initial Investment	-$2,800,000 1	-$2,800,000
1-20	Annual net cash inflow	(Annual Net cash flow) 9.1285	5,221,502
	Net present value		$ 2,421,502

Profitability index: Present value of cash inflow / Present value of cash outflow = $280,000 / $140,000 = 0.31

Note the Present value of cash inflow is the Annual net cash inflow calculated in 3. Above.

Also, the Present value of cash outflow is the initial cash outlay.

What is the Internal Rate of Return?