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:

-The free cash flow for the last year of Epiphany's project is closest to:
A)$47 750
B)$62 750
C)$39 000
D)$45 000

Question

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:
 
-The free cash flow for the last year of Epiphany's project is closest to:
A)$47 750 
B)$62 750 
C)$39 000 
D)$45 000

Quizplus · Accepted Answer

To calculate the free cash flow for Year 3, we need to subtract the incremental cash outflows from the incremental cash inflows:
$99,750 - $37,000 - $0 - $0 = $62,750

Therefore, the closest option is B) $62,750.

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