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	$	27,583
Costs		17,585
Depreciation		1,418
Earnings before interest and taxes (EBIT)	$	8,580
Interest expense		533
Pretax income		8,047
Federal taxes (@ 21%)		1,690
Net income	$	6,357

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	$	2,352			$	2,352			Debt due for repayment		—			$	415
Receivables		1,391				1,351			Accounts payable	$	3,419				3,159
Inventories		138				133			Total current liabilities	$	3,419			$	3,574
Other current assets		1,105				632
Total current assets	$	4,986			$	4,468
Fixed assets									Long-term debt	$	13,649			$	12,150
Property, plant, and equipment	$	24,693			$	22,851			Other long-term liabilities		3,073				2,973
Intangible assets (goodwill)		2,820				2,669			Total liabilities	$	20,141			$	18,697
Other long-term assets		2,999				3,115			Total shareholders’ equity		15,357				14,406
Total assets	$	35,498			$	33,103			Total liabilities and shareholders’ equity	$	35,498			$	33,103

In 2019 Quick Burger had capital expenditures of $3,065.

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