Net present ratio and IRR Use the information presented for Lakeside, Inc., in Mini-Exercise 16.4 and your calculation of the net present value of the new production equipment.

In Mini-Exercise 16.4, net present value Lakeside, Inc., is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of$10,000 per month. The new equipment will have a five-year life and cost $450,000, with an estimated salvage value of $30,000. Lakeside's cost of capital is 10%.

Required:

Calculate the present value ratio of the new production equipment, and comment on the internal rate of return of this investment relative to the cost of capital.