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 | $20,000 |
| Final sales value | 3,990 |
| Operating costs | 69,630 |
| New equipment | |
| Purchase cost | $170,000 |
| Final sales value | 3,990 |
| 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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