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Target wants to know if it should use its current equipment or replace it with...

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Accounting

Target wants to know if it should use its current equipment or replace it with new equipment.

The following information is available for current and new equipment:

Old equipment sales value $12,000

Final sales value for old equipment $2,630

Operating costs $63,240

New equipment Purchase cost $162,000

Final sales value $2,630

Operating cost savings $32,450

The current and new equipment will last for 6 years. If Target replaces the current equipment, what is the approximate internal rate of return?

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