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(Related to Checkpoint 17.1) (Discretionary financing needs) In the spring of 2013 the Caswell Publishing Company established a custom publishing business for its business clients.
(Related to Checkpoint 17.1) (Discretionary financing needs) In the spring of 2013 the Caswell Publishing Company established a custom publishing business for its business clients. These clients consisted principally of small- to medium-size companies in Round Rock, Texas. However, the company's plans were disrupted when they landed a large printing contract from Dell Computers Corp. (DELL) that they expected would run for several years. Specifically, the new contract would increase firm revenues by 100 percent. Consequently, Caswell's management knew they would need to make some significant changes in firm capacity, and quickly. The following balance sheet for 2013 and pro forma balance sheet for 2014 reflect the firm's estimates of the financial impact of the 100 percent revenue growth: 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 CFO as to specific sources of financing the firm should seek to fulfill its DFN? a. The discretionary financing needs are $ (Round to the nearest dollar.) Caswell Publishing Co. Caswell Publishing Co. Balance Sheet for 2013 Pro Forma Balance Sheet for 2014 Current assets $11,980,000 Current assets Net fixed assets 17,920,000 Net fixed assets Total $29,900,000 Total Accounts payable $1,930,000 Accounts payable Accrued expenses 2,040,000 Accrued expenses Notes payable 1,470,000 Notes payable Current liabilities $5,440,000 Current liabilities Long-term debt 6,540,000 Long-term debt Total liabilities $11,980,000 Total liabilities Common stock (par) 970,000 Common stock (par) Paid-in capital 1,910,000 Paid-in capital Retained earnings 15,040,000 Retained earnings Common equity $17,920,000 Common equity Total $29,900,000 Projected sources of financing Discretionary financing needs Total financing needs = Total assets (Click on the icon in order to copy its contents into a spreadsheet.) 100% $23,960,000 35,840,000 $59,800,000 $3,860,000 4,080,000 1,470,000 $9,410,000 6,540,000 $15,950,000 970,000 1,910,000 15,040,000 $17,920,000 $33,870,000
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