The following table shows an abbreviated income statement and balance sheet for Quick Burger Corporation for 2016.
INCOME STATEMENT OF QUICK BURGER CORP., 2016
(Figures in $ millions)
Net sales ............................................................. $27,567
Costs .................................................................. 17,569
Depreciation ........................................................... 1,402
Earnings before interest and taxes (EBIT) ........................$8,596
Interest expense .......................................................... 517
Pretax income ......................................................... 8,079
Taxes .................................................................... 2,614
Net income .............................................................$5,465
The following table shows an abbreviated income statement and balance
In 2016 Quick Burger had capital expenditures of $3,049.
a. Calculate Quick Burger's free cash flow
in 2016.
b. If Quick Burger was financed entirely by equity, how much more tax would the company have paid? (Assume a tax rate of 35%.)
c. What would the company's free cash flow
have been if it was all-equity financed?