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 $ 27,587 Costs 17,589 Depreciation 1,422 Earnings before interest and taxes (EBIT) $ 8,576 Interest expense 537 Pretax income 8,039 Federal taxes (@ 21%) 1,688 Net income $ 6,351 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 $ 2,356 $ 2,356 Debt due for repayment — $ 427 Receivables 1,395 1,355 Accounts payable $ 3,423 3,163 Inventories 142 137 Total current liabilities $ 3,423 $ 3,590 Other current assets 1,109 636 Total current assets $ 5,002 $ 4,484 Fixed assets Long-term debt $ 13,653 $ 12,154 Property, plant, and equipment $ 24,697 $ 22,855 Other long-term liabilities 3,077 2,977 Intangible assets (goodwill) 2,824 2,673 Total liabilities $ 20,153 $ 18,721 Other long-term assets 3,003 3,119 Total shareholders’ equity 15,373 14,410 Total assets $ 35,526 $ 33,131 Total liabilities and shareholders’ equity $ 35,526 $ 33,131 In 2019 Quick Burger had capital expenditures of $3,069. 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 $ 27,587 Costs 17,589 Depreciation 1,422 Earnings before interest and taxes (EBIT) $ 8,576 Interest expense 537 Pretax income 8,039 Federal taxes (@ 21%) 1,688 Net income $ 6,351 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 $ 2,356 $ 2,356 Debt due for repayment — $ 427 Receivables 1,395 1,355 Accounts payable $ 3,423 3,163 Inventories 142 137 Total current liabilities $ 3,423 $ 3,590 Other current assets 1,109 636 Total current assets $ 5,002 $ 4,484 Fixed assets Long-term debt $ 13,653 $ 12,154 Property, plant, and equipment $ 24,697 $ 22,855 Other long-term liabilities 3,077 2,977 Intangible assets (goodwill) 2,824 2,673 Total liabilities $ 20,153 $ 18,721 Other long-term assets 3,003 3,119 Total shareholders’ equity 15,373 14,410 Total assets $ 35,526 $ 33,131 Total liabilities and shareholders’ equity $ 35,526 $ 33,131 In 2019 Quick Burger had capital expenditures of $3,069. 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	$	27,587
Costs		17,589
Depreciation		1,422
Earnings before interest and taxes (EBIT)	$	8,576
Interest expense		537
Pretax income		8,039
Federal taxes (@ 21%)		1,688
Net income	$	6,351

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	$	2,356		$	2,356		Debt due for repayment		—	$	427
Receivables		1,395			1,355		Accounts payable	$	3,423		3,163
Inventories		142			137		Total current liabilities	$	3,423	$	3,590
Other current assets		1,109			636
Total current assets	$	5,002		$	4,484
Fixed assets							Long-term debt	$	13,653	$	12,154
Property, plant, and equipment	$	24,697		$	22,855		Other long-term liabilities		3,077		2,977
Intangible assets (goodwill)		2,824			2,673		Total liabilities	$	20,153	$	18,721
Other long-term assets		3,003			3,119		Total shareholders’ equity		15,373		14,410
Total assets	$	35,526		$	33,131		Total liabilities and shareholders’ equity	$	35,526	$	33,131

In 2019 Quick Burger had capital expenditures of $3,069.

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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