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 Sales (Revenues) Cost of Goods Sold (50% of Sales) Depreciation - - = EBIT 0 A. $66,600 B. $55,500 C. $59,200 D. $74,000 Taxes (20%) = unlevered net income + Depreciation + changes to working capital - capital expenditures The free cash flow for the last year of Epiphany's project is closest to: 1 150,000 75,000 20,000 55,000 11,000 44,000 20,000 - 5,000 - 90,000 ... 2 150,000 75,000 20,000 55,000 11,000 44,000 20,000 - 5,000 3 150,000 75,000 20,000 55,000 11,000 44,000 20,000 10,000

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 Sales (Revenues) Cost of Goods Sold (50% of Sales) Depreciation - - = EBIT 0 A. $66,600 B. $55,500 C. $59,200 D. $74,000 Taxes (20%) = unlevered net income + Depreciation + changes to working capital - capital expenditures The free cash flow for the last year of Epiphany's project is closest to: 1 150,000 75,000 20,000 55,000 11,000 44,000 20,000 - 5,000 - 90,000 ... 2 150,000 75,000 20,000 55,000 11,000 44,000 20,000 - 5,000 3 150,000 75,000 20,000 55,000 11,000 44,000 20,000 10,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section10.A: Mutually Exclusive Investments Having Unequal Lives

Problem 2P

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