October 13, 2015

Homework Help: roosevelt university

Posted by Anonymous on Thursday, December 29, 2011 at 2:11am.

Preston Corporation is evaluating its potential investment in a $225,660 piece of equipment with a three-year life and no salvage value. The company anticipates that pre-tax cash flows in each of the three years will equal to 22%, 44%, and 66%, respectively, of the investment’s face value. The tax rate is 28%. Pre-tax cash flows, discounted at 10 percent, are $427,697, undiscounted after-tax cash flows are $279,185, and after-tax cash flows, discounted at 10 percent, are $225,660. The internal rate of return is:

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