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 $ 27,571 Costs 17,573 Depreciation 1,406 Earnings before interest and taxes (EBIT) $ 8,592 Interest expense 521 Pretax income 8,071 Federal plus other taxes 2,825 Net income $ 5,246 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 $ 2,340 $ 2,340 Debt due for repayment — $ 379 Receivables 1,379 1,339 Accounts payable $ 3,407 3,147 Inventories 126 121 Total current liabilities $ 3,407 $ 3,526 Other current assets 1,093 620 Total current assets $ 4,938 $ 4,420 Fixed assets Long-term debt $ 13,637 $ 12,138 Property, plant, and equipment $ 24,681 $ 22,839 Other long-term liabilities 3,061 2,961 Intangible assets (goodwill) 2,808 2,657 Total liabilities $ 20,105 $ 18,625 Other long-term assets 2,987 3,103 Total shareholders’ equity 15,309 14,394 Total assets $ 35,414 $ 33,019 Total liabilities and shareholders’ equity $ 35,414 $ 33,019 In 2019 Quick Burger had capital expenditures of $3,053.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 $ 27,571 Costs 17,573 Depreciation 1,406 Earnings before interest and taxes (EBIT) $ 8,592 Interest expense 521 Pretax income 8,071 Federal plus other taxes 2,825 Net income $ 5,246 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 $ 2,340 $ 2,340 Debt due for repayment — $ 379 Receivables 1,379 1,339 Accounts payable $ 3,407 3,147 Inventories 126 121 Total current liabilities $ 3,407 $ 3,526 Other current assets 1,093 620 Total current assets $ 4,938 $ 4,420 Fixed assets Long-term debt $ 13,637 $ 12,138 Property, plant, and equipment $ 24,681 $ 22,839 Other long-term liabilities 3,061 2,961 Intangible assets (goodwill) 2,808 2,657 Total liabilities $ 20,105 $ 18,625 Other long-term assets 2,987 3,103 Total shareholders’ equity 15,309 14,394 Total assets $ 35,414 $ 33,019 Total liabilities and shareholders’ equity $ 35,414 $ 33,019 In 2019 Quick Burger had capital expenditures of $3,053. 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.)

Answer 1