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
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 6PB: There are two projects under consideration by the Rainbow factory. Each of the projects will require...
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