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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%

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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