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 projection:

The free cash flow for the first year of Epiphany's project is ________.

A. $53,200

B. $45,600

C. $28,500

D. $38,000

\begin{tabular}{|l|l|l|l|l|} \hline Year & 0 & 1 & 2 & 3 \\ \hline Sales (Revenues) & & 100,000 & 100,000 & 100,000 \\ \hline \begin{tabular}{l} - Cost of Goods Sold (50\% of \\ Sales) \end{tabular} & & 50,000 & 50,000 & 50,000 \\ \hline - Depreciation & & 30,000 & 30,000 & 30,000 \\ \hline - EBIT & 20,000 & 20,000 & 20,000 \\ \hline - Taxes (35\%) & & 13,000 & 7,000 & 7,000 \\ \hline - unlevered net income & & 50,000 & 30,000 & 30,000 \\ \hline + Depreciation & 90,000 & & & \\ \hline \begin{tabular}{l} -/+ increase/(decrease) in working \\ capital \end{tabular} & & 5,000 & 5,000 & 5,000 \\ \hline - capital expenditures & & & & \\ \hline \end{tabular}