Top Posters
Since Sunday
6
l
6
5
n
5
N
5
m
5
j
4
s
4
4
c
4
r
4
m
4
New Topic  
zmudasam zmudasam
wrote...
Posts: 360
Rep: 8 0
3 months ago
Use the information for the question(s) below.

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:

Year0    1      2    3    
Sales (Revenues)100,000100,000100,000
- Cost of Goods Sold (50% of Sales)50,00050,00050,000
- Depreciation30,00030,00030,000
= EBIT20,00020,00020,000
- Taxes (35%)700070007000
= unlevered net income13,00013,00013,000
+ Depreciation30,00030,00030,000
+ changes to working capital-5000-500010,000
- capital expenditures-90,000

The free cash flow for the first year of Epiphany's project is closest to:

▸ $38,000

▸ $25,000

▸ $45,000

▸ $43,000
Textbook 

Fundamentals of Corporate Finance


Edition: 2nd
Authors:
Read 211 times
6 Replies
Replies
Answer verified by a subject expert
JjogbhfJjogbhf
wrote...
Posts: 288
Rep: 8 0
3 months ago
Sign in or Sign up in seconds to unlock everything.
$38,000
1

Related Topics

Answer accepted by topic starter
wrote...
3 months ago
Use the information for the question(s) below.

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:

Year0    1      2    3    
Sales (Revenues)100,000100,000100,000
- Cost of Goods Sold (50% of Sales)50,00050,00050,000
- Depreciation30,00030,00030,000
= EBIT20,00020,00020,000
- Taxes (35%)700070007000
= unlevered net income13,00013,00013,000
+ Depreciation30,00030,00030,000
+ changes to working capital-5000-500010,000
- capital expenditures-90,000

The free cash flow for the last year of Epiphany's project is closest to:

▸ $35,000

▸ $53,000

▸ $38,000

▸ $43,000
Answer verified by a subject expert
jfinn1021jfinn1021
wrote...
Posts: 316
3 months ago
Sign in or Sign up in seconds to unlock everything.
$53,000
1

Related Topics

wrote...
3 months ago
Thanks
Answer accepted by topic starter
wrote...
3 months ago
Use the information for the question(s) below.

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:

Year0    1      2    3    
Sales (Revenues)100,000100,000100,000
- Cost of Goods Sold (50% of Sales)50,00050,00050,000
- Depreciation30,00030,00030,000
= EBIT20,00020,00020,000
- Taxes (35%)700070007000
= unlevered net income13,00013,00013,000
+ Depreciation30,00030,00030,000
+ changes to working capital-5000-500010,000
- capital expenditures-90,000

The net present value (NPV) for Epiphany's Project is closest to:

▸ $11,946

▸ $4825

▸ $39,000

▸ $20,400
Answer verified by a subject expert
KaajalpKaajalp
wrote...
Posts: 283
3 months ago
Sign in or Sign up in seconds to unlock everything.
$11,946
1

Related Topics

New Topic      
Explore
Post your homework questions and get free online help from our incredible volunteers.
Learn More
Improve Grades
Help Others
Save Time
Accessible 24/7
  69 People Browsing
 163 Signed Up Today
Your Opinion
Who's your favorite biologist?
Votes: 48

Previous poll results: What's your favorite coffee beverage?
Related Images
 355
 124
 38