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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 $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$55,536 in free cash floww $55,536 $87,786 $93,036 $100,536 Can a company have negative free
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