Ch 03: Assignment - Financial Statements, Cash Flow, and Taxes Suppose you are the only owner of a chain of coffee shops near universities. Your current cafes are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial performance: Financial update as of June 15 Your existing business generates $75,000 in EBIT. The corporate tax rate applicable to your business is 35%. The depreciation expense reported in the financial statements is $14,286. You don't need to spend any money for new equipment in your existing cafes, however, you do need $11,250 of additional cash. You also need to purchase $6,000 in additional supplies such as cloth tableclothes and napkins, and more formal tableware-on credit. It is also estimated that your accruals, including taxes and wages payable, will increase by $3,750. Based on your evaluation you have in free cash flow. Can a company have negative free cash flow? Yes