Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plans on using a cost of capital of12% to evaluate this project. Based on extensiveresearch, it has prepared the following incremental cash flowprojects:

Year 0 1 2 3

Sales(Revenues) 100,000 100,000 100,000

Cost of Goods Sold(50% ofSales) 50,000 50,000 50,000

Capital Cost Allowance 13,500 22,950 16,065

=EBIT 36,500 27,050 33,935

Taxes (35%) 12,775 9,468 11,877

=Unlevered net income 23,725 17,582 22,058

+Capital Cost Allowance 13,500 22,950 16,065

+Changes to working capital 5,000 5,000 10,000

Capital Expenditures 90,000

The free cash flow for the first year ofEpiphany's project is closestto:

A.

$35,532

B.

$45,000

C.

$32,225

D.

$25,000

E.

$43,000