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X Company must decide whether to continue using its current equipment or replace it with...

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Accounting

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 $12,000
Final sales value 3,250
Operating costs 62,220
New equipment
Purchase cost $162,000
Final sales value 3,250
Operating cost savings 30,510

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?

A: 0.03 B: 0.04 C: 0.05 D: 0.06 E: 0.07 F: 0.08

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