(Related to Checkpoint17.1)(Discretionary financingneeds)In the spring of 2013 the Caswell Publishing Company established a custom publishing business for its business clients. These clients consisted principally ofsmall-tomedium-size companies in RoundRock, Texas. However, thecompany'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 firmcapacity, and quickly. The following balance sheet for 2013 and pro forma balance sheet for 2014 reflect thefirm's estimates of the financial impact of the 100 percent revenuegrowth:

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

b.Given the nature of the new contract and the specific needs for financing that the firmexpects, what recommendations might you offer to thefirm's CFO as to specific sources of financing the firm should seek to fulfill itsDFN?

A.Sale of fixed assets. B.Notes payable. C.Common stock. D.Long-term debt. E.Retained earnings.

Caswell Publishing Co. Balance Sheet for 2010 Current assets Net fixed assets Total Accounts payable Accrued expenses Notes payable Current liabilities Long-term debt Total liabilities Common stock (par) Paid-in-capital Retained earnings Common equity Total Caswell Publishing Co. Pro Forma Balance Sheet for 2011 11960000 Current assets 18010000 Net fixed assets 29970000 Total 1920000 Accounts payable 1990000 Accrued expenses 1510000 Notes payable 5420000 Current liabilities 6500000 Long-term debt 11920000 Total liabilities 950000 Common stock (par) 2040000 Paid-in-capital 15060000 Retained earnings 18050000 Common equity 29970000 Projected sources of financing Discretionary financing needs Total financing needs=Total assets 100% 23920000 36020000 59940000 3840000 3980000 1510000 9330000 6500000 15830000 950000 2040000 15060000 18050000 33880000