Nextyear's sales for Cumberland Mfg. are expected to be $21.85 million. Current sales are $19 million, based on current assets of $6.33 million and fixed assets of $9.50 million. Thefirm's net profit margin is 3 percent after taxes. Cumberland estimates that its current assets will rise in direct proportion to the increase insales, but that its fixed assets will increase by only$200,000. Currently, Cumberland has $1.50 million in accounts payable(which vary directly withsales), $2 million inlong-term debt(due in 10years), and common equity(including $1million in retainedearnings) totaling $12.33 million. Cumberland plans to pay $0.22 million in common stock dividends next year.

a. What areCumberland's total financing needs(that is, totalassets) for the comingyear?

b. Given thefirm's projections and dividend paymentplans, what are its discretionary financingneeds?

c. Based on yourprojections, and assuming that the$200,000 expansion in fixed assets willoccur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources offinancing?