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 - Taxes (20%) unlevered net income + Depreciation + changes to working capital - capital expenditures OA. $60,000 OB. $80,000 OC. $112,000 D. $96,000 -90,000 1 200,000 100,000 25,000 75,000 15,000 2 200,000 100,000 3 200,000 100,000 25,000 25,000 75,000 75,000 15,000 15,000 60,000 60,000 60,000 25,000 25,000 -5000 -5000 25,000 -5000

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
icon
Related questions
icon
Concept explainers
Topic Video
Question
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:
0
Year
Sales (Revenues)
- Cost of Goods Sold (50% of Sales)
- Depreciation
= EBIT
- Taxes (20%)
unlevered net income
+ Depreciation
+ changes to working capital
- capital expenditures
OA. $60,000
OB. $80,000
OC. $112,000
OD. $96,000
- 90,000
1
200,000
100,000
25,000
75,000
15,000
60,000
25,000
<-5000
2
3
200,000
200,000
100,000
100,000
25,000
25,000
75,000
75,000
15,000
15,000
60,000
60,000
25,000 25,000
<-5000
-5000
Sam
ns.
FIN
df
FIN
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: 0 Year Sales (Revenues) - Cost of Goods Sold (50% of Sales) - Depreciation = EBIT - Taxes (20%) unlevered net income + Depreciation + changes to working capital - capital expenditures OA. $60,000 OB. $80,000 OC. $112,000 OD. $96,000 - 90,000 1 200,000 100,000 25,000 75,000 15,000 60,000 25,000 <-5000 2 3 200,000 200,000 100,000 100,000 25,000 25,000 75,000 75,000 15,000 15,000 60,000 60,000 25,000 25,000 <-5000 -5000 Sam ns. FIN df FIN
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education