. Your existing business generates $75,000 in EBIT. • The corporate tax rate applicable to your business is 25%. . 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 cafés; however, you do need $11,250 of additional cash. • You also need to purchase $6,000 in additional supplies-such as 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 Financial update as of June 15 O Repurchasing common stock O Acquiring operating assets 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?

. Your existing business generates $75,000 in EBIT. • The corporate tax rate applicable to your business is 25%. . 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 cafés; however, you do need $11,250 of additional cash. • You also need to purchase $6,000 in additional supplies-such as 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 Financial update as of June 15 O Repurchasing common stock O Acquiring operating assets 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?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $19,000 and will be depreciated straight-line over 7 years to a salvage value of zero. The grill will have no effect on revenues, but will save Johnny's $20,000 in energy expenses. The tax rate is 31 percent. What are the operating cash flows in years 1 to 7? Enter your answer below. Number
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ary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment $ 175,000 Working capital needed $ 185,000 Annual cash inflow from sales $ 190,000 Annual cash outflow for operating costs $ 145,000 Salvage value of equipment $ 20,000 Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the present value factor you will use for the net annual cash flows?
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