(Forecasting financing needs) Zapatera Enterprises is evaluating its financing requirements for 2017. The firm has been in business for only one year, but its CFO predicts that the firm’s operating expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of sales. In 2016, Zapatera had $12 million in sales with net income of $1.2 million. The firm anticipates that next year’s sales will reach $15 million with net income of $2 million. Given its present high rate of growth, the firm retains all of its earnings to help defray the cost of new investments.

The firm’s balance sheet for the year just ended is as follows:

Zapatera Enterprises, Inc.

Balance Sheet, December 31, 2016

% of Sales Current assets $3,000,000 25%

Net fixed assets 6,000,000 50%

Total assets $9,000,000 Liabilities and owners’ equity Accounts payable $3,000,000 25%

Long-term debt 2,000,000 NAa Total liabilities $5,000,000 Common stock $1,000,000 NAa Paid-in capital 1,800,000 NAa Retained earnings 1,200,000 Total common equity $ 4,000,000 Total liability and owners’ equity $ 9,000,000 aNot applicable. These account balances do not vary with sales and are assumed to remain constant for purposes of forecasting next year’s financing requirements.

Estimate Zapatera’s total financing requirements (total assets) and its net funding requirements (discretionary financing needed) for 2017.