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 $ 27,580 Costs 17,582 Depreciation 1,415 Earnings before interest and taxes (EBIT) $ 8,583 Interest expense 530 Pretax income 8,053 Federal taxes (@ 21%) 1,691 Net income $ 6,362 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 $ 2,349 $ 2,349 Debt due for repayment — $ 406 Receivables 1,388 1,348 Accounts payable $ 3,416 3,156 Inventories 135 130 Total current liabilities $ 3,416 $ 3,562 Other current assets 1,102 629 Total current assets $ 4,974 $ 4,456 Fixed assets Long-term debt $ 13,646 $ 12,147 Property, plant, and equipment $ 24,690 $ 22,848 Other long-term liabilities 3,070 2,970 Intangible assets (goodwill) 2,817 2,666 Total liabilities $ 20,132 $ 18,679 Other long-term assets 2,996 3,112 Total shareholders’ equity 15,345 14,403 Total assets $ 35,477 $ 33,082 Total liabilities and shareholders’ equity $ 35,477 $ 33,082 In 2019 Quick Burger had capital expenditures of $3,062. 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 $ 27,580 Costs 17,582 Depreciation 1,415 Earnings before interest and taxes (EBIT) $ 8,583 Interest expense 530 Pretax income 8,053 Federal taxes (@ 21%) 1,691 Net income $ 6,362 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 $ 2,349 $ 2,349 Debt due for repayment — $ 406 Receivables 1,388 1,348 Accounts payable $ 3,416 3,156 Inventories 135 130 Total current liabilities $ 3,416 $ 3,562 Other current assets 1,102 629 Total current assets $ 4,974 $ 4,456 Fixed assets Long-term debt $ 13,646 $ 12,147 Property, plant, and equipment $ 24,690 $ 22,848 Other long-term liabilities 3,070 2,970 Intangible assets (goodwill) 2,817 2,666 Total liabilities $ 20,132 $ 18,679 Other long-term assets 2,996 3,112 Total shareholders’ equity 15,345 14,403 Total assets $ 35,477 $ 33,082 Total liabilities and shareholders’ equity $ 35,477 $ 33,082 In 2019 Quick Burger had capital expenditures of $3,062. 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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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	$	27,580
Costs		17,582
Depreciation		1,415
Earnings before interest and taxes (EBIT)	$	8,583
Interest expense		530
Pretax income		8,053
Federal taxes (@ 21%)		1,691
Net income	$	6,362

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	$	2,349		$	2,349		Debt due for repayment		—	$	406
Receivables		1,388			1,348		Accounts payable	$	3,416		3,156
Inventories		135			130		Total current liabilities	$	3,416	$	3,562
Other current assets		1,102			629
Total current assets	$	4,974		$	4,456
Fixed assets							Long-term debt	$	13,646	$	12,147
Property, plant, and equipment	$	24,690		$	22,848		Other long-term liabilities		3,070		2,970
Intangible assets (goodwill)		2,817			2,666		Total liabilities	$	20,132	$	18,679
Other long-term assets		2,996			3,112		Total shareholders’ equity		15,345		14,403
Total assets	$	35,477		$	33,082		Total liabilities and shareholders’ equity	$	35,477	$	33,082

In 2019 Quick Burger had capital expenditures of $3,062.

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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