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	$	27,575
Costs		17,577
Depreciation		1,410
Earnings before interest and taxes (EBIT)	$	8,588
Interest expense		525
Pretax income		8,063
Federal taxes (@ 21%)		1,693
Net income	$	6,370

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	$	2,344			$	2,344			Debt due for repayment		—			$	391
Receivables		1,383				1,343			Accounts payable	$	3,411				3,151
Inventories		130				125			Total current liabilities	$	3,411			$	3,542
Other current assets		1,097				624
Total current assets	$	4,954			$	4,436
Fixed assets									Long-term debt	$	13,641			$	12,142
Property, plant, and equipment	$	24,685			$	22,843			Other long-term liabilities		3,065				2,965
Intangible assets (goodwill)		2,812				2,661			Total liabilities	$	20,117			$	18,649
Other long-term assets		2,991				3,107			Total shareholders’ equity		15,325				14,398
Total assets	$	35,442			$	33,047			Total liabilities and shareholders’ equity	$	35,442			$	33,047

In 2019 Quick Burger had capital expenditures of $3,057.

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