please answer 9

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The 2016 income statement and balance sheet (excerpts) for BNSF Railway are below.

BNSF Railway

Consolidated Statements of Income

Year ended December 31,

2016

2015

2014

(In millions)
Revenues

$19,829

$21,967

$23,239

Operating expenses:
Compensation and benefits

4,769

5,043

5,023

Purchased services

2,418

2,546

2,592

Depreciation and amortization

2,128

2,001

2,123

Fuel

1,934

2,656

4,478

Equipment rents

766

801

867

Materials and other

1,129

1,196

1,143

Total operating expenses

13,144

14,243

16,226

Operating income

6,685

7,724

7,013

Interest expense

992

928

833

Other expense, net

0

21

11

Income before income taxes

5,693

6,775

6,169

Income tax expense

2,124

2,527

2,300

Net income

$ 3,569

$ 4,248

$ 3,869

BNSF Railway

Consolidated Balance Sheets

December 31,

2016

2015

(in millions)
Current assets
Cash and cash equivalents

$ 3,218

$ 2,329

Accounts receivable, net

1,272

1,198

Materials and supplies

825

829

Current portion of deferred income taxes

0

245

Other current assets

235

337

Total current assets

5,550

4,938

Property and equipment, net of accumulated

depreciation of $6,130 and $4,845, respectively

61,250

59,510

Goodwill

14,845

14,845

Intangible assets, net

430

468

Other assets

2,047

1,942

Total assets

$84,122

$81,703

The footnotes to the financial statements included the following:

Property and equipment, net (in millions), and the corresponding ranges of estimated useful lives were as follows:

December 31,

2016

2015

2016

Range of

Estimated

Useful Life

Land for transportation purposes

$ 6,063

$ 6,037

Track structure

22,287

21,200

15-50 years

Other roadway

25,990

24,767

7-100 years

Locomotives

8,338

7,794

7-35 years

Freight cars and other equipment

2,755

2,629

8-40 years

Computer hardware, software, and other

982

897

6-9 years

Construction in progress

965

1,031

Total cost

67,380

64,355

Less accumulated depreciation and

amortization

(6,130

)

(4,845

)
Property and equipment, net

$61,250

$59,510

Required:

a. What proportion of total assets, does BNSF hold as property and equipment in 2016 and 2015? Does this surprise you?
b. Compute property and equipment turnover for 2016 and 2015. Property and equipment, net for 2014 was $55,806 million. Explain this ratio.
c. By what percentage are the assets ‘used up’ at year-end 2016? What implication does this ratio have for future cash flows at BNSF?
d. Estimate the useful life on average for the BNSF depreciable assets at year-end 2016. Which of the assets listed in the footnote explain this estimated useful life?

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