Question
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
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 | 2,720 |
| Operating costs | 65,450 |
| New equipment | |
| Purchase cost | $170,000 |
| Final sales value | 2,720 |
| Operating cost savings | 27,690 |
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?
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Financial Accounting Tools for Business Decision Making
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
5th Edition
9781118560952, 1118560957, 978-0470239803
