For the next fiscal year, you forecast net income of $48,100 and ending assets of $504,000. Your firm's payout ratio is 9.6%. Your beginning stockholders' equity is $298,000 and your beginning total liabilities are $119,700. Your non-debt liabilitie such as accounts payable are forecasted to increase by $9,700. Assume your beginning debt is $109,800. 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 deb equity ratio constant? Please show work. The amount of equity to issue will be... The amount of debt to issue will be...

For the next fiscal year, you forecast net income of $48,100 and ending assets of $504,000. Your firm's payout ratio is 9.6%. Your beginning stockholders' equity is $298,000 and your beginning total liabilities are $119,700. Your non-debt liabilitie such as accounts payable are forecasted to increase by $9,700. Assume your beginning debt is $109,800. 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 deb equity ratio constant? Please show work. The amount of equity to issue will be... The amount of debt to issue will be...

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

For the next fiscal year, you forecast net income of $48,100 and ending assets of
$504,000. Your firm's payout ratio is 9.6%. Your beginning stockholders' equity is
$298,000 and your beginning total liabilities are $119,700. Your non-debt liabilities
such as accounts payable are forecasted to increase by $9,700. Assume your
beginning debt is $109,800. 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?
Please show work.
The amount of equity to issue will be...
The amount of debt to issue will be...

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A company finances its operations with 57 percent debt and the rest using equity. The annual yield on the company's debt is 6% and the required rate of return on the stock is 14.6%. What is company's WACC? Assume the tax rate is 30%
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Assume that you are on the financial staff of Vanderheiden Inc., and you have collected the following data: The yield on the company’s outstanding bonds is 7.75%, its tax rate is 25%, the next expected dividend is $0.65 a share, the dividend is expected to grow at a constant rate of 6.00% a year, the price of the stock is $14.00 per share, the flotation cost for selling new shares is F = 10%, and the target capital structure is 45% debt and 55% common equity. What is the firm's WACC, assuming it must issue new stock to finance its capital budget? 9.96% 7.98% 10.12% 8.75% 8.23%
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Assume that you are on the financial staff of Jerry Inc., and you have collected the following data: The yield on the company's outstanding bonds is 8.75%; its tax rate is 40%; the next expected dividend is $0.75 a share; the dividend is expected to grow at a constant rate of 7.00% a year; the price of the stock is $15.00 per share; and the target capital structure is 40% debt and 60% common equity. What is the firm's WACC? 9.04% 9.80% 8.44% O7.64% 9.30%
Your firm has an ROE of 12.1%, a payout ratio of 27%, $594,200 of stockholders' equity, and $386,100 of debt. If you grow at your sustainable growth rate this year, how much additional debt will you need to issue?
Tomey Supply Company’s financial statements for the most recent fiscal year are shown below. The company projects that sales will increase by 11 percent next year. Assume that all costs and assets increase directly with sales. The company has a constant 35 percent dividend payout ratio and has no plans to issue new equity. Any financing needed will be raised through the sale of long-term debt. Prepare pro forma financial statements for the coming year based on this information, and calculate the EFN for Tomey. Tomey Supply Company Income Statement and Balance Sheet Income Statement Balance Sheet Revenues $1,768,121 Assets Costs 1,116,487 Current Assets $280,754 EBT 651,634 Net Fixed Assets 713,655 Taxes (35%) 228,072 Total assets $994,409 Net Income $423,562 Liabilities and Equity: Current Liabilities $167,326 Long-term debt 319,456 Common Stock 200,000 Retained Earnings 307,627 Total liabilities…
Esther’s Egg Farm is constructing its pro forma financial statements for this year. At year end, assets were $400,000 and accounts payable (the only current liabilities account) were $125,000. Last year’s sales were $500,000. Esther’s expects to grow by 15 percent this year. Assets and accounts payable are expected to grow proportionally to sales. Common stock currently equals $140,000, and retained earnings are $98,000. Esther’s plans to sell $15,000 of new common stock this year. The firm’s profit margin on sales is 6 percent, and 40 percent of earnings will be paid out as dividends. How much new long-term debt financing will Esther’s need this year to finance its expected growth? Esther’s is currently operating at full capacity.

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