Garr Company estimates its investment to be $0.25 in assets for each dollar of new sales. By each dollar of additional sales $0.04 profits will be produced and $0.01 can be reinvested in the company.

If sales rise by $400,000 the following year from their current level of $3.5 million and the ratio of spontaneous liabilities is 10 percent, what will be Garr Company’s need for discretionary financing? You need to estimate the changes in financing needs and match it with expected changes in spontaneous liabilities, retained earnings, and other sources of discretionary financing.