What are? cumberland total financing needs

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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 3 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 ?$1million 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?

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?

Reference no: EM132386252

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