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.)
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
Section: Chapter Questions
Problem 1PS
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The following table shows an abbreviated income statement and
INCOME STATEMENT OF QUICK BURGER CORP., 2019 | |||
(Figures in $ millions) | |||
Net sales | $ | 27,586 | |
Costs | 17,588 | ||
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 ( |
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
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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