Required:

1. What proportion of total assets, does BNSF hold as property and equipment in 2016 and 2015? Does this surprise you?

2. Compute property and equipment turnover for 2016 and 2015. Property and equipment, net for 2014 was $55,806 million. Explain this ratio.

3. By what percentage are the assets used up at year-end 2016? What implication does this ratio have for future cash flows at BNSF?

4. Estimate the useful life on average for the BNSF depreciable assets at year-end 2016. Which of the assets listed in the footnote explain this estimated useful life?

he 2016 income statement and balance sheet (excerpts) for BNSF Railway are below. Dec. 31, 2014 $ 23,239 BNSF RAILWAY Consolidated Statements of Income (in millions) Dec. 31, 2016 Dec. 31, 2015 Revenues $ 19,829 $ 21,967 Operating expenses: Compensation and benefits 4,769 5,043 Purchased services 2,418 2,546 Depreciation and amortization 2,128 2,001 Fuel 1,934 2,656 Equipment rents 766 801 Materials and other 1,129 1,196 Total operating expenses 13,144 14,243 Operating income 6,685 7,724 Interest expense 992 928 Other expense, net 0 21 Income before income taxes 5,693 6,775 Income tax expense 2,124 2,527 Net income $ 3,569 $ 4,248 5,023 2,592 2,123 4,478 867 1,143 16,226 7,013 833 11 6,169 2,300 $ 3,869 Dec. 31, 2015 BNSF RAILWAY Consolidated Balance Sheets (in millions) Dec. 31, 2016 Current assets: Cash and cash equivalents $ 3,218 Accounts receivable, net 1,272 Materials and supplies 825 Current portion of deferred income taxes 0 Other current assets 235 Total current assets 5,550 Property and equipment, net of accumulated 61,250 depreciation of $6,130 and $4,845, respectively Goodwill 14,845 Intangible assets, net 430 Other assets 2,047 Total assets $84,122 $ 2,329 1,198 829 245 337 4,938 59,510 14,845 468 1,942 $81,703 Continued next page The footnotes to the financial statements included the following: Property and equipment, net (in millions), and the corresponding ranges of estimated useful lives were as follows: 2016 Range of Estimated Useful Life Land for transportation purposes Track structure Other roadway Locomotives Freight cars and other equipment Computer hardware, software and other Construction in progress Total cost Less accumulated depreciation and amortization Property and equipment, net December 31, 2016 $ 6,063 22,287 25,990 8,338 2,755 982 965 67,380 December 31, 2015 $ 6,037 21,200 24,767 7,794 2,629 897 1,031 64,355 1550 years 7-100 years 7-35 years 8-40 years 6-9 years (6,130) 61,250 (4,845) 59,510 $ $