Help please! I will like some explaination for part b and c. The following table
ID: 2615342 • Letter: H
Question
Help please! I will like some explaination for part b and c.The following table shows an abbreviated income statement and balance sheet for Quick Burger Corporation for 2016 E STATEMENT OF QUICK BURGER CORP., 2016 (Figures in $ nillions) Net sales Costs Depreciation Earnings before interest and taxes (EBIT) Interest expense Pretax income Taxes Net incone 27,567 17,569 8,596 517 8,079 2,614 5,465 BALANCE SHEET OF QUICK ENAGER CORP., 2016 (Figures in millions) 2015 Liabilities and Shareholders Equity 2016 2016 2015 Assets Current assets Cash and marketable securities Receivables Inventories Other current assets Total current assets Fixed assets Property, plant, and equipment Intangible assets (goodwill) Other long-term assets Total assets Current liabilities 2,336 2,336 Debt due for repayment 1,375 1,335 Accounts payable 367 3.143 3,4033,510 3,403 14 122 1,089 4,922 117 Total current liabilities 616 4,484 Long-term debt 13,63312,134 2,957 20,89318,601 15,29314,399 24,677 22,835 0ther long-term liabilities 2,884 2,653 Total liabilities 2,983 3,099 Total shareholders' equity 35,386 32,991 Total liabilities and shareholders' equity35,386 32,991 In 2016 Quick Burger had capital expenditures of $3,049
Explanation / Answer
a) Free cash flow = Cash flow from operations-Capital expenditure-Change in NWC = Workings: Cash flow from operations = Net income+ interest+ depreciation = 5465+517+1402 = $ 7,384.00 Chanage in NWC = (4922-3403)-(4404-3143) = $ 258.00 Free cash flow = 7384-3049-258 = $ 4,077.00 b) Additional tax = Interest expense*tax rate = 517*35.00% = $ 180.95 c) Free cash flow if all equity = 4077.00+180.95 = $ 4,257.95 Note: Marginal tax rate is 35% for the highest income slab for corporates.
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