Arizona State University FIN FIN 40628 Please show your work Problem 1 Consider the following timeline…
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 projections:
Yr 0 1 2 3
-Sales (Rev in $) 100,000 100,000 100,000
COGS(50% of Sales) 50,000 50,000 50,000
– Depreciation 30,000 30,000 30,000
= EBIT 20,000 20,000 20,000
– Taxes (21%) 4200 4200 4200
= Unlevered Net Inc. 15,800 15,800 15,800
+ Depreciation 30,000 30,000 30,000
+ Changes to Working Capital -5000 -5000 10,000
– Capital Expenditures -90,000
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