(Using the percent-of-sales method of forecasting) Tulley Appliances, Inc., projects next years sales to be $20 million. Current sales are at $15 million, based on current assets of $7 million and fixed assets of $8 million. The firms net profit margin is 5 percent after taxes. Tulley forecasts that current assets will rise in direct proportion to the increase in sales but that fixed assets will increase by only $150,000. Currently, Tulley has $1.5 million in accounts payable (which vary directly with sales), $7 million in long-term debt (due in 10 years), and common equity (including $4 million in retained earnings) totaling $6.5 million. Tulley plans to pay $500,000 in common stock dividends next year.

a. What are Tulleys total financing needs (that is, total assets) for the coming year?

b. Given the firms projections and dividend payment plans, what are its discretionary financing needs?

c. Based on your projections and the assumption 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?