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.)

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 74E

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Question

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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