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Part 1

For the next fiscal​ year, you forecast net income of 

​$49 comma 60049,600 

and ending assets of 

​$506 comma 000506,000. 

Your​ firm's payout ratio is 

10.1 %.10.1%. 

Your beginning​ stockholders' equity is 

​$295 comma 000295,000 

and your beginning total liabilities are 

​$120 comma 500120,500. 

Your​ non-debt liabilities such as accounts payable are forecasted to increase by 

​$9 comma 9009,900. 

What is your net new financing needed for next​ year?

The Tax Cuts and Jobs Act of 2017 temporarily allowed​ 100% bonus depreciation​ (effectively expensing capital​ expenditures). However, we will still include depreciation forecasting in this chapter and in these problems.

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Part 1

The net financing required will be 

​$enter your response here. 

 ​(Round to the nearest​ dollar.)

To calculate the net new financing needed for next year, we can break the problem down into several steps:

### Step 1: Calculate Retained Earnings
First, we need to calculate how much of the net income will be retained by the firm after the dividend payout. This can be done using the firm's **payout ratio**.

The formula for **retained earnings** is:

\[
\text{Retained Earnings} = \text{Net Income} \times (1 - \text{Payout Ratio})
\]

Given:
- Net Income = \$49,600
- Payout Ratio = 10.1% = 0.101

\[
\text{Retained Earnings} = 49,600 \times (1 - 0.101) = 49,600 \times 0.899 = 44,550.4
\]

Retained Earnings ≈ \$44,550.

### Step 2: Calculate Change in Stockholders' Equity
The retained earnings will increase the stockholders' equity. So, the change in stockholders' equity is equal to the retained earnings:

\[
\Delta \text{Equity} = \text{Retained Earnings} = 44,550
\]

### Step 3: Calculate Total New Financing Required
Now, we calculate the total assets needed, subtract the increase in liabilities (non-debt liabilities such as accounts payable), and account for the increase in equity to find the financing gap.

The formula is:

\[
\text{Net New Financing} = \text{Ending Assets} - (\text{Beginning Liabilities} + \text{Increase in Non-Debt Liabilities}) - (\text{Beginning Equity} + \Delta \text{Equity})
\]

Where:
- Ending Assets = \$506,000
- Beginning Liabilities = \$120,500
- Increase in Non-Debt Liabilities = \$9,900
- Beginning Equity = \$295,000
- Change in Equity = \$44,550 (from retained earnings)

Substitute the values:

\[
\text{Net New Financing} = 506,000 - (120,500 + 9,900) - (295,000 + 44,550)
\]
\[
\text{Net New Financing} = 506,000 - 130,400 - 339,550
\]
\[
\text{Net New Financing} = 506,000 - 469,950 = 36,050
\]

### Final Answer:
The net new financing needed for next year is approximately **\$36,050**.

---

Would you like more details on any step or have further questions? Here are some related topics to explore:

1. How does the payout ratio affect retained earnings?
2. What are non-debt liabilities and how do they affect financing needs?
3. How do changes in stockholders' equity influence financing?
4. What is the difference between net income and retained earnings?
5. How is the ending balance of assets estimated?

**Tip:** Always ensure you understand the role of liabilities when calculating new financing to avoid underestimating or overestimating your capital needs.

For the next fiscal year, you forecast net income of $49,600 and ending assets of $506,000. Your firm's payout ratio is 10.1%. Your beginning stockholders' equity is $295,000 and your beginning total liabilities are $120,500. Your non-debt liabilities such as accounts payable are forecasted to increase by $9,900. What is your net new financing needed for next year?

This problem involves forecasting net new financing needs for the next fiscal year using financial concepts like net income, payout ratio, equity, and liabilities. It includes calculating retained earnings and determining the financing gap using detailed financial formulas. Suitable for college-level finance students.

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