(1) ABC Corporation had earnings before interest and taxes (EBIT) of $100,000 in year 2016. ABC’s income tax rate was 40%. During 2016, ABC experienced no change in the amount of net fixed assets (like property, plant and equipment) on its balance sheet. However, net operating working capital (like inventories and accounts receivable) increased by $30,000 due to steadily increasing sales. What was ABC Corporation’s free cash flow for 2016?
(2) Name four different things that ABC Corporation management could do with the 2016 free cash flows.