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) 200,000 200,000 200,000 - Cost of Goods Sold (50% of Sales) 100,000 100,000 100,000 - Depreciation 20,000 20,000 20,000 = EBIT 80,000 80,000 80,000 Taxes (35%) 28,000 28,000 28,000 = unlevered net income 52,000 52,000 52,000 Depreciation 20,000 20,000 20,000 + changes to working capital -5,000 -5,000 10,000 capital expenditures - 90,000 O A. $82,000 OB. $65,600 c. $73,800 D. $61,500 0 Year Sales (Revenues) Cost of Goods Sold (50% of Sales) - Depreciation = EBIT - Taxes (35%) = unlevered net income + Depreciation + changes to working capital - capital expenditures 1 200,000 100,000 20,000 80,000 28,000 52,000 20,000 -5,000 2 200,000 100,000 20,000 80,000 28,000 52,000 20,000 -5,000 3 200,000 100,000 20,000 80,000 28,000 52,000 20,000 10,000 - 90,000 The free cash flow for the last year of Epiphany's project is closest to: A. $82,000 O B. $65,600 O c. $73,800 D. $61,500