Question
The following table shows an abbreviated income statement and balance sheet for Quick Burger Corporation for 2016. INCOME STATEMENT OF QUICK BURGER CORP., 2016 (Figures
The following table shows an abbreviated income statement and balance sheet for Quick Burger Corporation for 2016.
INCOME STATEMENT OF QUICK BURGER CORP., 2016 | |||
(Figures in $ millions) | |||
Net sales | $ | 27,582 | |
Costs | 17,584 | ||
Depreciation | 1,417 | ||
Earnings before interest and taxes (EBIT) | $ | 8,581 | |
Interest expense | 532 | ||
Pretax income | 8,049 | ||
Taxes | 2,817 | ||
Net income | $ | 5,232 | |
BALANCE SHEET OF QUICK BURGER CORP., 2016 | |||||||||||||||||
(Figures in $ millions) | |||||||||||||||||
Assets | 2016 | 2015 | Liabilities and Shareholders' Equity | 2016 | 2015 | ||||||||||||
Current assets | Current liabilities | ||||||||||||||||
Cash and marketable securities | 2,351 | 2,351 | Debt due for repayment | 412 | |||||||||||||
Receivables | 1,390 | 1,350 | Accounts payable | 3,418 | 3,158 | ||||||||||||
Inventories | 137 | 132 | Total current liabilities | 3,418 | 3,570 | ||||||||||||
Other current assets | 1,104 | 631 | |||||||||||||||
Total current assets | 4,982 | 4,464 | |||||||||||||||
Fixed assets | Long-term debt | 13,648 | 12,149 | ||||||||||||||
Property, plant, and equipment | 24,692 | 22,850 | Other long-term liabilities | 3,072 | 2,972 | ||||||||||||
Intangible assets (goodwill) | 2,819 | 2,668 | Total liabilities | 20,138 | 18,691 | ||||||||||||
Other long-term assets | 2,998 | 3,114 | Total shareholders equity | 15,353 | 14,405 | ||||||||||||
Total assets | 35,491 | 33,096 | Total liabilities and shareholders equity | 35,491 | 33,096 | ||||||||||||
In 2016 Quick Burger had capital expenditures of $3,064.
a. Calculate Quick Burgers free cash flow in 2016. (Enter your answer in millions.)
b. If Quick Burger was financed entirely by equity, how much more tax would the company have paid? (Assume a tax rate of 35%.) (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
c. What would the companys free cash flow have been if it was all-equity financed?
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