Question on after-tax cash flows

Reference no: EM1330970

Preston Corporation is evaluating its potential investment in a $240,000 piece of equipment with a 3-year life and no salvage value. The company's hurdle rate is 10 percent and it anticipates that pre-tax cash flows in each of the three years will equal 20 percent, 40 percent, and 60 percent, respectively, of the investment's face value. The tax rate is 30 percent. Discounted pre-tax cash flows are $429,953, undiscounted after-tax cash flows are $273,600, and discounted after-tax cash flows are $221,414. What is the net present value of the investment?

Reference no: EM1330970

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