17-9. (Related to Checkpoint 17.1 on page 472) (Discretionary financing needs) Harrison Electronics, Inc. operates a chain of electrical lighting and fixture distribution centers throughout northern Arizona. The firm is anticipating expansion of its sales in the coming year as a result of recent population growth trends. The firm's financial analyst has prepared pro forma balance sheets that reflect three different rates of growth in firm sales for the coming year and the corresponding non-discretionary sources of financing the firm expects to have available, as follows:

Pro forma Balance Sheet for 2011

10%20%40%

Current Assets13,200.00014,400,00016,800,000

Net Fixed Assets19,800,00021,600,00025,200,000

Total33,000,00036,000,00042,000,000

Account Payable2,200,0002,400,0002,800,000

Accrued Expenses2,200,0002,400,0002,800,000

Notes PayableNo Change1,500,0001,500,000 1,500,000

Current Liabilities5,900,0006,300,0007,100,000

Long Term DebtNo Change6,500,0006,500,0006,500,000

Total Liabilities12,400,00012,800,00013,600,000

Common Stock (par)No Change1,000,0001,000,0001,000,000

Paid in CapitalNo Change 2,000,0002,000,0002,000,000

Retained Earnings15,550,00015,600,00015,700,000

Common Equity18,550,00018,600,00018,700,000

Projected Sources of Financing $30,950,000$31,400,000$32,300,000

Discretionary Financing Needs:

Total financing needs = Total Assets:

a. How much new discretionary financing will Caswell require based on the above estimates?

b. Given the nature of the new contract and the specific needs for financing that the firm expects, what recommendations might you offer to the firm's chief financial officer as to specific sources of financing the firm should seek to fulfill its DFN?