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How did they get the debt needed to maintain the ratio of $134,565. How did they get the new debt of $134,565?

For the next fiscal year, you forecast net income of $49,500 and ending assets of $507,500. Your firm's payout ratio is 9.8%. Your beginning stockholders' equity is $296,400 and your beginning total liabilities are $120,400. Your non-debt liabilities such as accounts payable are forecasted to increase by $10,500. Assume your beginning debt is $112,500. 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 debt needed to maintain the debt-to-equity ratio is found solving the following for debt: NewEquityNewDebt= Debt-to-Equity Ratio where: New Equity = New Assets - New Non-debt Liabilities - New Debt Therefore, For the next fiscal year, you forecast net income of $49,500 and ending assets of $507,500. Your firm's payout ratio is 9.8%. Your beginning stockholders' equity is $296,400 and your beginning total liabilities are $120,400. Your non-debt liabilities such as accounts payable are forecasted to increase by $10,500. Assume your beginning debt is $112,500. 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. New Equity = New Assets - New Non-debt Liabilities - New Debt Therefore, $489,100NewDebtNewDebt=0.379555 New Debt =$134,565 The amount of debt needed to maintain the ratio is $134,565

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