The following table shows an abbreviated income statement and balance sheet for McDonald's Corporation for 2012.

INCOME STATEMENT OF MCDONALD'S CORP., 2012

(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

In 2012 McDonald's had capital expenditures of $3,049.
a. Calculate McDonald's free cash flow in 2012.
b. If McDonald's 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?

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BALANCE SHEET OF MCDONALD'S CORP, 2012 (Fiqures in S millions) Assets Current assets Cash and marketable securities Receivables 2012 2011 Liabilities and Shareholders' Equity Current liabilities Debt due for repayment Accounts payable Total current liabilities 2012 2011 2,336 2,336 1,375 1,335 3,403 3,403 367 3,143 3,509 122 1,089 4,922 Other current assets Total current assets Fixed assets Property, plant, and equipment Intangible assets (goodwill) Other long-term assets Total assets 616 4,403 12,134 2,957 18,600 14,390 35,387 32,990 Total liabilities and shareholders' equity 35,387 32,990 Long-term debt 13,633 3,057 20,093 15,294 24,677 22,835 2,804 2,653 3,099 Other long-term liabilities Total liabilities Total shareholders' equity 2,983