Lombard Company Limited (LCL) is contemplating the purchase high-speed grinder to replace

the existing grinder. The existing grinder was purchased 2 years back at an installed cost of

$60,000. The existing grinder can be used for another 5 years. The existing grinder can be sold

for $70,000 removal and clean up costs will total $42,000.

The new grinder costs $105,000 and requires $5,000 to install and has a life of 5 years. To

support the increased business resulting from the purchase of a new grinder, the controller for

LCL gathered the following information:

Accounts payable by	58,000
Inventories would increase by	30,000
Account payable by	58,000
Salvage value of existing grinder	$0
New grinder net value	29,000
CCA rate for class 8 Asset	20%
The tax rate for LCL	40%
Cost of Capital for LCL	12%

The estimated operating income for both grinders are shown below

YR	New Grinder	Existing Grinder
1	$43,000	$26,000
2	$43,000	$24,000
3	$43,000	22,000
4	$43,000	20,000
5	$43,000	18,000

A) should LCL go with the purchase of a new grinder?

b) Determine the approximate Internal Rate of Return for this proposal?