(Financial forecasting-percent of sales) Next year's sales for Cumberland Mfg. are expected to be $21.85 million. Current sales are $19 million, based on current assets of $6.33 million and fixed assets of $9.50 million. The firm's net profit margin is 4 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 $200,000. Currently, Cumberland has $1.50 million in accounts payable (which vary directly with sales), $2 million in long-term debt (due in 10 years), and common equity (including $3 million in retained earnings) totaling $12.33 million. Cumberland plans to pay $0.22 million in common stock dividends next year.
a. What are Cumberland's total financing needs (that is, total assets) for the coming year $ million (Round to two decimal places.)
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 $200,000 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?