# roosevelt university

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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 investmentâ€™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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• roosevelt university -

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:

a. 10%

b. 44%

c. 22%

d. 23.7%

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