Question content area top

Part $1$

$($Financial forecastinglong dashpercent of sales$)$ Next$$ year's sales for Cumberland Mfg$.$ are expected to be $$$$22\mathrm{.}00$ million. Current sales are $$$$18$million$,$ based on current assets of $$$$5\mathrm{.}00$ million and fixed assets of $$$$5\mathrm{.}00$ million. The$$ firm's net profit margin is $5$ percent after taxes. Cumberland estimates that its current assets will rise in direct proportion to the increase in$$ sales, but that its fixed assets will increase by only$$ $$150,000.$ Currently, Cumberland has $$$$2\mathrm{.}00$ million in accounts payable$($which vary directly with$$ sales$),$$$1$ million in$$ long$-$term debt$($due in $10$ years$),$ and common equity$($including $$$$4$ million in retained$$ earnings$)$ totaling $$$$7\mathrm{.}00$ million. Cumberland plans to pay $$$$0\mathrm{.}75$ million in common stock dividends next year.

a$.$ What are$$ Cumberland's total financing needs$($that is$,$ total$$ assets$)$ for the coming$$ year?

b$.$ Given the$$ firm's projections and dividend payment$$ plans, what are its discretionary financing$$ needs?

c$.$ Based on your$$ projections, and assuming that the$$ $$150,000$ expansion in fixed assets will$$ occur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources of$$ financing?

Question content area bottom

Part $1$

a$.$ What are$$ Cumberland's total financing needs$($taht is$,$ total$$ assets$)$ for the coming$$ year?

$$$

$$

enter your response here million$($Round to two decimal$$ places.$)$

Part $2$

b$.$ Given the$$ firm's projections and dividend payment$$ plans, what are its discretionary financing$$ needs?

$$$

$$

enter your response here million$($Round to two decimal$$ places.$)$

Part $3$

c$.$ Based on your$$ projections, and assuming that the$$ $$150,000$ expansion in fixed assets will$$ occur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources of$$ financing?

$$$

$$

enter your response here million$($Round to two decimal$$ places.$)$