Question

In: Finance

For the next fiscal​ year, you forecast net income of $51,300 and ending assets of $505,400....

For the next fiscal​ year, you forecast net income of $51,300 and ending assets of $505,400. Your​ firm's payout ratio is 10.5%. Your beginning​ stockholders' equity is

$298,500 and your beginning total liabilities are $120,300. Your​ non-debt liabilities such as accounts payable are forecasted to increase by $9,900. Assume your beginning debt is

$101,800.What amount of equity and what amount of debt would you need to issue to cover the net new financing in order to keep your​ debt-equity ratio​ constant?

The Tax Cuts and Jobs Act of 2017 temporarily allows​ 100% bonus depreciation​ (effectively expensing capital​ expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career.

The amount of equity to issue will be ----?(Round to the nearest​ dollar.)

The amount of debt to the issue will be -----?(Round to the nearest​ dollar.)

Solutions

Expert Solution

Total assets is equal to equity plus total liabilities. Equity increases to the extend of retion which is net income*(1-pay out ratio). The remaining amount out of the total increase in equity needs to be issued.

Total liabilities comprise of debt as well as non debt liabilities.

Amount of equity issue needed= $309,781

Amount of debt issue needed= $19,506

Details as follows:

jeff jeffy answered 2 years ago
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