Question

For the next fiscal? year, you forecast net income of $ 52,000 and ending assets of...

For the next fiscal? year, you forecast net income of $ 52,000 and ending assets of $ 502, 700. Your? firm's payout ratio is 10.4 %. Your beginning? stockholders' equity is $ 296,800 and your beginning total liabilities are $ 119, 800. Your? non-debt liabilities such as accounts payable are forecasted to increase by $ 9 ,900. Assume your beginning debt is $ 107 ,300. 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 amount of equity to issue will be

?$________(Round to the nearest? dollar.)

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Answer #1

Beginnig Debt/Equity ratio=107300/296800=0.361523
Beginning Non debt liabilities=119800-107300=12500
Ending Non debt liabilities=12500+9900=22400
Ending Assets=502700
Ending Debt=x
Ending Total Loabilieits=x+22400
Ending Retained Earnings=52000*(1-10.4%)=46592
Ending Equity=x/0.361523
Debt+Equity+Non-Debt Liabilities=Assets
=>x+x/0.361523+22400=502700
=>x=127533.3
Hence, Debt to be issued=127533.3-107300=20233.3=20233
Equity to be issued=127533.3/0.361523-296800=55966.77=55967

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