Garrett Boone, Farish Enterprises vice president of operations, needs to replace an automatic lathe on the production line. The model he is considering has a sales price of $271,150 and will last for 7 years. It will have no salvage value at the end of its useful life. Garrett estimates the new lathe will reduce raw materials scrap by $41,000 per year. He also believes the lathe will reduce energy costs by $24,750 per year. If he purchases the new lathe, he will be able to sell the old lathe for $5,612.

Calculate the lathes internal rate of return.