Question: X Company must decide whether to continue using its current equipment or replace it with new , more efficient equipment . The following information is

X Company must decide whether to continue using its current equipment or replace it with new , more efficient equipment . The following information is available for the current and new equipment :

Current equipment

Current sales value $ 16,000

Final sales value 2,570

Operating costs 66,850

New equipment

Purchase cost $ 166,000

Final sales value 2,570

Operating costs 34,400

The current and new equipment will last for 6 years . If X Company replaces the current equipment , what is the approximate internal rate of return ?

  1. 0.03 b. 0.04 c. 0.05 d.0.06 e. 0.07 f. 0.08

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