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Managerial Accounting

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Moderate

Determining Internal Rate of Return

MGRACT-C1XB34

ELP Corporation is considering purchasing a new lathe for \$33,000. The lathe would generate a net cash flow of \$10,200 per year for five years. At the end of five years, the lathe would have no salvage value. The company's cost of capital is 12% and it uses straight line depreciation.

The approximate internal rate of return, ignoring income taxes, is:

A

$16\%$

B

$25\%$

C

$30\%$

D

$21\%$