Obviously, in English we would actually say "I'm making lunch" or "I'm preparing lunch", but I wasn't about to risk losing a heart :)
We would say "Preparo il pranzo" as well, in Italian. Both works! :)
Why can't that mean "Cook lunch."?
Because that implies "you" as an imperative sentence, of which this is not.
It's very difficult to understand what the woman is saying - especially when you want to hear the phrase or sentence said slowly. It is very frustrating.