Epiphany Industries is considering a new capital budgeting project that will last for three years....
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Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plans on using a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projects:
Year
0
1
2
3
Sales (Revenues)
100,000
100,000
100,000
- Cost of Goods Sold (50% of Sales)
50,000
50,000
50,000
- Depreciation
30,000
30,000
30,000
= EBIT
20,000
20,000
20,000
- Taxes (35%)
7000
7000
7000
= unlevered net income
13,000
13,000
13,000
+ Depreciation
30,000
30,000
30,000
- capital expenditures
-90,000
The free cash flow for the first year of Epiphany's project is closest to:
$43,000
$25,000
$13,000
$45,000
The NPV for Epiphany's Project is closest to:
$4,800
$39,000
$13,300
$20,400
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