Management can make any form of distribution to the firm’s shareholders using the company’s free cash flow (FCF). The underlying objective is to maximize shareholder wealth by increasing the firm’s value. Any use of FCF that negatively affects the firm’s value is not considered a good use of the FCF.

Which of the following uses is considered to be a good use of free cash flow?

1.Invest in nonoperating assets
2.Invest in operating assets
3.Theoretically, there are some traditional ways of using FCF. If a company uses all of its FCF to pay off all of its debt, it would reap the maximum benefit from the tax-deductible component of interest payments toward the debt.
4.This statement is false because if the firm uses its FCF to pay off all of its debt, it would have and no deductible.

James jones is the owner of a small retail business operated as a sole proprietorship. during 2017, his business recorded the following items of income and expense: revenue from inventory sales $ 147,000 cost of goods sold 33,500 business license tax 2,400 rent on retail space 42,000 supplies 15,000 wages paid to employees 22,000 payroll taxes 1,700 utilities 3,600 compute taxable income attributable to the sole proprietorship by completing schedule c to be included in james’s 2017 form 1040. compute self-employment tax payable on the earnings of james’s sole proprietorship by completing a 2017 schedule se, form 1040. assume your answers to parts a and b are the same for 2018. further assume that james's business is not a service business, and that it has $155,000 unadjusted basis in tangible depreciable property. calculate james's 2018 section 199a deduction.