XI 14-3. (Financial forecastingdiscretionary financing needs) Sambonoza Enterprises proj- Mylab ects its sales next year to be $4 million and expects to earn 5 percent of that amount after taxes. The firm is currently in the process of projecting its financing needs and has made the following assumptions (projections): 1. Current assets will equal 20 percent of sales, and fixed assets will remain at their current level of $1 million. 2. Common equity is currently $0.8 million, and the firm pays out half its after-tax earnings in dividends. 3. The firm has short-term payables and trade credit that normally equal 10 per- cent of sales, and it has no long-term debt outstanding. What are Sambonoza's financing requirements (i.e., total assests) and discretionary financing needs (DFN) for the coming year? 14-4. (Financial forecasting-percent of sales) Next year's sales for Cumberland Mfg. are expected to be $22 million. Current sales are $18 million, based on current assets of $5 million and fixed assets of $5 million. The firm's net profit margin is 5 percent after taxes. Cumberland estimates that 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 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) total- ing $6.5 million. Cumberland plans to pay $750,000 in common stock dividends next year. a. What are Cumberland's total financing needs (that is, total assets) for the com- ing year? b. Given the firm's projections and dividend payment plans, what are its discre- tionary 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