The following table shows an abbreviated income statement and balance sheet for Quick Burger Corporation for 2019.   INCOME STATEMENT OF QUICK BURGER CORP., 2019 (Figures in $ millions) Net sales $ 27,586   Costs   17,588   Depreciation   1,421   Earnings before interest and taxes (EBIT) $ 8,577   Interest expense   536   Pretax income   8,041   Federal taxes (@ 21%)   1,689   Net income $ 6,352       BALANCE SHEET OF QUICK BURGER CORP., 2019 (Figures in $ millions)   Assets 2019   2018   Liabilities and Shareholders' Equity 2019   2018     Current assets                 Current liabilities                   Cash and marketable securities $ 2,355     $ 2,355     Debt due for repayment   —     $ 424       Receivables   1,394       1,354     Accounts payable $ 3,422       3,162       Inventories   141       136     Total current liabilities $ 3,422     $ 3,586       Other current assets     1,108       635                         Total current assets $ 4,998     $ 4,480                         Fixed assets                 Long-term debt $ 13,652     $ 12,153       Property, plant, and equipment $ 24,696     $ 22,854     Other long-term liabilities   3,076       2,976       Intangible assets (goodwill)   2,823       2,672     Total liabilities $ 20,150     $ 18,715       Other long-term assets   3,002       3,118     Total shareholders’ equity   15,369       14,409       Total assets $ 35,519     $ 33,124     Total liabilities and shareholders’ equity $ 35,519     $ 33,124         In 2019 Quick Burger had capital expenditures of $3,068.     a. Calculate Quick Burger’s free cash flow in 2019. (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 21%.) (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)           c. What would the company’s free cash flow have been if it was all-equity financed? (Enter your answer in millions.)

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
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The following table shows an abbreviated income statement and balance sheet for Quick Burger Corporation for 2019.

 

INCOME STATEMENT OF QUICK BURGER CORP., 2019
(Figures in $ millions)
Net sales $ 27,586  
Costs   17,588  
Depreciation   1,421  
Earnings before interest and taxes (EBIT) $ 8,577  
Interest expense   536  
Pretax income   8,041  
Federal taxes (@ 21%)   1,689  
Net income $ 6,352  
 

 

BALANCE SHEET OF QUICK BURGER CORP., 2019
(Figures in $ millions)
  Assets 2019   2018   Liabilities and Shareholders' Equity 2019   2018  
  Current assets                 Current liabilities                
  Cash and marketable securities $ 2,355     $ 2,355     Debt due for repayment       $ 424    
  Receivables   1,394       1,354     Accounts payable $ 3,422       3,162    
  Inventories   141       136     Total current liabilities $ 3,422     $ 3,586    
  Other current assets     1,108       635                      
  Total current assets $ 4,998     $ 4,480                      
  Fixed assets                 Long-term debt $ 13,652     $ 12,153    
  Property, plant, and equipment $ 24,696     $ 22,854     Other long-term liabilities   3,076       2,976    
  Intangible assets (goodwill)   2,823       2,672     Total liabilities $ 20,150     $ 18,715    
  Other long-term assets   3,002       3,118     Total shareholders’ equity   15,369       14,409    
  Total assets $ 35,519     $ 33,124     Total liabilities and shareholders’ equity $ 35,519     $ 33,124    
 

 

In 2019 Quick Burger had capital expenditures of $3,068.

 

 

a. Calculate Quick Burger’s free cash flow in 2019. (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 21%.) (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

 

 

 

 

 

c. What would the company’s free cash flow have been if it was all-equity financed? (Enter your answer in millions.)

 

 

 
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