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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 first year of Epiphany's project is closest to:
A)$47 750
B)$47 000
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 first year of Epiphany's project is closest to:
A)$47 750 
B)$47 000 
C)$39 000 
D)$45 000

Quizplus · Accepted Answer

The free cash flow (FCF) for a project is calculated by taking the earnings before interest and taxes (EBIT), adding depreciation, subtracting taxes, and then subtracting the capital expenditures and changes in working capital. Without the specific numbers provided in the question, the exact calculation process can't be detailed, but the correct answer is chosen based on the information given.

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