Question: Your existing business generates $ 1 2 3 , 0 0 0 in EBIT. The corporate tax rate applicable to your business is 3 5

Your existing business generates $123,000 in EBIT.The corporate tax rate applicable to your business is 35%.The depreciation expense reported in the financial statements is $23,429.You dont need to spend any money for new equipment in your existing cafes; however, you do need $18,450 of additional cash.You also need to purchase $9,840 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 $6,150.
Based on your evaluation, you havein free cash flow.
Free cash flow can be used for various reasons, including distributing it to stockholders and debtholders. Which of the following is nota use of free cash flow?
Distributing dividends to stockholders
Acquiring operating assets

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