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Epiphany Industries is considering a new capital budgeting project that will last for two years. The...

Epiphany Industries is considering a new capital budgeting project that will last for two years. The revenue for the first year is 200,000 and revenues grow at an annual rate of 10%. The cost of goods sold is 50% of the revenue. The capital expenditure is 120,000. The tax rate is 35%. Epiphany plans on using a cost of capital of 12% to evaluate this project. The depreciation is straight-line depreciation. Please fill in the following blanks: 15 points (3 points each)

Time (the end of the year)

0

1

2

Free Cash Flow

(        )

(        )

(         )

NPV = (        )

IRR = (        )
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Answer #1

Please find the below table

0 1 2
Free Cash Flow -120000 86000 92500
NPV $30,526.15
IRR 30.66%

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