The free cash flow for the last year of Epiphany's project is closest to ________
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 0 1 2 3
Sales (Revenues) $150,000 $150,000 $150,000
- Cost of Goods Sold (50% of Sales) 75,000 75,000 75,000
- Depreciation 20,000 20,000 20,000
= EBIT 55,000 55,000 55,000
- Taxes (35%) 19,250 19,250 19,250
= unlevered net income 35,750 35,750 35,750
+ Depreciation 20,000 20,000 20,000
+/(-) increase/(decrease) in working capital 5,000 5,000 -10,000
- capital expenditures -$90,000
A) $65,750
B) $59,175
C) $49,313
D) $52,600
Answer: A
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Fill in the blank(s) with the appropriate word(s).