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: 3 125,000 62,500 25,000 Year Sales (Revenues) - Cost of Goods Sold (50% of Sales) - Depreciation - EBIT - Taxes (20%) 125,000 62,500 25,000 125,000 62,500 25,000 37,500 37,500 37,500 7,500 30,000 25,000 - 5,000 7,500 30,000 = unlevered net income + Depreciation + changes to working capital - capital expenditures 7,500 30,000 25,000 10,000 25,000 - 5,000 - 90,000
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: 3 125,000 62,500 25,000 Year Sales (Revenues) - Cost of Goods Sold (50% of Sales) - Depreciation - EBIT - Taxes (20%) 125,000 62,500 25,000 125,000 62,500 25,000 37,500 37,500 37,500 7,500 30,000 25,000 - 5,000 7,500 30,000 = unlevered net income + Depreciation + changes to working capital - capital expenditures 7,500 30,000 25,000 10,000 25,000 - 5,000 - 90,000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The net present value (NPV) for Epiphany's Project is closest to:
O A. $122,304
O B. $81,536
OC. $40,768
O D. $20,384
Transcribed Image Text: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:
Yea
1
3
Sales (Revenues)
Cost of Goods Sold (50% of Sales)
125,000
125,000
62,500
25,000
37,500
125,000
62,500
25,000
62,500
25,000
Depreciation
= EBIT
- Taxes (20%)
= unlevered net income
+ Depreciation
+ changes to working capital
- capital expenditures
37,500
37,500
7,500
7,500
7,500
30,000
25,000
30,000
25,000
30,000
25,000
- 5,000
- 5,000
10.000
- 90,000
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