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 $135,000 in EBIT.

The corporate tax rate applicable to your business is 25%.

The depreciation expense reported in the financial statements is $25,714.

You dont need to spend any money for new equipment in your existing cafes; however, you do need $20,250 of additional cash.

You also need to purchase $10,800

It is also estimated that your accruals, including taxes and wages payable, will increase by $6,750.