Question 3 (chapter 8) (25 points) Palpet is considering a new capital budgeting project that will last for three years. The total capital expenditures of Palpet to be made at date 0 is Euro 750,000. Palpet plans on using a cost of capital of 10% to evaluate this project. Based on extensive research, it has prepared the following projections in Euro's: 0 3 Year Sales (Revenues) Cost of Goods Sold (50% of Sales) Depreciation Ebit Interest payments EBI Taxes (25%) Net income changes to working capital Capital Expenditures 750000 2 2000000 2000000 2000000 1000000 1000000 1000000 250000 250000 250000 750000 750000 750000 75000 75000 75000 675000 675000 675000 168750 168750 168750 581250 581250 581250 -500000 -5000000 1000000 a) What are the free cash flows for all years (0 to 3)? (10 points) b) What is the NPV of this project? (5 points)

Question 3 (chapter 8) (25 points) Palpet is considering a new capital budgeting project that will last for three years. The total capital expenditures of Palpet to be made at date 0 is Euro 750,000. Palpet plans on using a cost of capital of 10% to evaluate this project. Based on extensive research. it has prepared the following proiections in Euro's: a) What are the free cash flows for all years ( 0 to 3) ? (10 points) b) What is the NPV of this project? (5 points)