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:
-The NPV for Epiphany's Project is closest to:
A)$4825.
B)$39,000.
C)$18,671.
D)$20,400.

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 projections: 
-The NPV for Epiphany's Project is closest to:
A)$4825. 
B)$39,000. 
C)$18,671. 
D)$20,400.

Quizplus · Accepted Answer

To calculate the NPV using the given cash flow projections, we need to discount each year's cash flows using the 12% cost of capital. Then, we add up the discounted cash flows and subtract the initial investment of $75,000. Doing this calculation yields an NPV of $18,671, which is closest to option C. Therefore, the best choice is C.

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