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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
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 in additional suppliessuch as tableclothes and napkins, and more formal tablewareon credit. | |
It is also estimated that your accruals, including taxes and wages payable, will increase by $6,750. |
Based on your evaluation you have ? in free cash flow.
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