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The amount of a firm's available cash used to write off capital expenditures and depreciation Suppose you are the only owner of a chain of
The amount of a firm's available cash used to write off capital expenditures and depreciation
Suppose you are the only owner of a chain of coffee shops near universities. Your current cafs are doing well, but you are interested in starting a finedining 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
Your existing business generates $ in EBIT.
The corporate tax rate applicable to your business is
The depreciation expense reported in the financial statements is $
You don't need to spend any money for new equipment in your existing cafs; however, you do need $ of additional cash.
You also need to purchase $ 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 $
Based on your evaluation you have in free cash flow.
Free cash flow can be used for various reasons, including distributing it to stockholders and debtholders. Which of the following is not a use of free cash flow?
Distributing dividends to stockholders
Acquiring operating assets
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