Final answer:
The IRR for the project is determined by finding the discount rate that equates the present value of the future cash inflow from rebuilding the factory with the additional investment of $4,000,000. The provided details do not give us the exact percentage, but the IRR formula would lead to the final answer for the company's decision.
Step-by-step explanation:
The Internal Rate of Return (IRR) is a financial metric used to evaluate the profitability of a potential investment. It is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. In this case, the company needs to compare the cost of investment to the present value of returns. By investing $4,000,000 now to earn $4,600,000 next year, the IRR can be calculated by solving the equation $4,000,000 / (1 + IRR) = $4,600,000. The IRR in this scenario is the rate that equates the present value of the future cash inflow of $4,600,000 with the initial investment of $4,000,000.
Through this equation, the IRR for this project can be found and is expressed as a percentage. This rate represents the expected annual rate of growth that the investment will yield. Unfortunately, the detailed information provided does not include the solution to calculate the IRR directly. However, solving the equation would provide the IRR for this investment opportunity.
The resulting IRR can then be compared to the company's required rate of return to decide whether to proceed with the investment.