Suppose you are the only owner of a chain of coffee shops near universities. Your current cafes
Question:
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:
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 tablecloths 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.
Calculate the total free cash flow Show all work.