Suppose you are the only owner of a chain of coffee shops near universities. Your current caf$$s 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 $25\%.$

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 caf$$s; however, you do need $$11,250$ of additional cash.

You also need to purchase $$6,000$ in additional supplies$-$such as 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 $$

No