Question

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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 $27,571 17,573 Costs Depreciation Earnings before interest and taxes (EBIT) $8,592 Interest expense 1,406 521 Pretax income 8,071 2,825 $5,246 Тахes Net income BALANCE SHEET OF QUICK BURGER CORP., 2016 (Figures in $ millions) Assets 2016 2015 Liabilities and Shareholders' Equity Current liabilities 2016 Current assets 2015 Cash and marketable 2,340 Debt due for repayment 2,340 securities 379 Receivables Inventories Other current assets 1,379 1,339 Accounts payable 3,407 3,147 126 121 Total current liabilities 3,407 3,526 1,093 620 < Prev 9 of 10 Next >

Answer 1

Given Net Sales Cost Depreciation EBIT Interest Expenses Pretax income Taxes Net Income 27571 17573 1406 8592 521 8071 2825 5246 Solution a) Free cash Flow Particulars Net Income Add: Depreciation Free cash flow Amount 5246 1406 6652 Hence, Free cash flow is $ 6652 b) Additional Tax, if wholly financed Particulars EBIT Taxes when wholly financed by equity (EBIT X Tax Rate) Taxes when not wholly financed Additional Tax (A-B) Amount 8592 3007.2 2825 182.2 Hence, Additional Tax is $ 182.2 c) Free cash flow if all equity financed Particulars EBIT Less: Taxes (EBIT X Tax Rate) Net Income Add: Depreciation Free cash flow Amount 8592 3007.2 5584.8 1406 6990.8 Hence, Free cash flow when all equity financed is $ 6990.80