The net present value (NPV) for Epiphany's Project is closest to:O A. $122,304O B. $81,536OC. $40,768O D. $20,384 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:Yea13Sales (Revenues)Cost of Goods Sold (50% of Sales)125,000125,00062,50025,00037,500125,00062,50025,00062,50025,000Depreciation= EBIT- Taxes (20%)= unlevered net income+ Depreciation+ changes to working capital- capital expenditures37,50037,5007,5007,5007,50030,00025,00030,00025,00030,00025,000- 5,000- 5,00010.000- 90,000

Net Present Value ("NPV") is a capital budgeting method. NPV method compares the present value of…

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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fINANCE Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 11%. 0 1 2 3 4 Project A -1,250 650 450 230 280 Project B -1,250 250 385 380 730 What is Project A's MIRR? Do not round intermediate calculations. Round your answer to two decimal places. % Hide Feedback Partially Correct Check My Work Feedback Review the MIRR equation. The solution for MIRR is a percentage rate not a dollar value. Review the NPV equation definition. Don't discount the Year 0 cash flow since its PV is simply -1,250. The MIRR calculation is dependent on the firm's WACC. What is Project B's MIRR? Do not round…
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Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 11%. 0 1 2 3 4 Project A -1,050 600 360 300 290 Project B -1,050 200 295 450 740 What is Project A’s IRR? Do not round intermediate calculations. Round your answer to two decimal places. _________ % What is Project B's IRR? Do not round intermediate calculations. Round your answer to two decimal places. _________% If the projects were independent, which project(s) would be accepted according to the IRR method? If the projects were mutually exclusive, which…

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