?(Financial forecastinglong dashpercent of sales?) Next? year'ssales for Cumberland Mfg. are expected to be ?$15.60 million.Current sales are ?$13 ?million, based on current assets of ?$4.33million and fixed assets of ?$6.50 million. The? firm's net profitmargin is 5 percent after taxes. Cumberland estimates that itscurrent 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 ?$2 million inretained? earnings) totaling ?$7.33 million. Cumberland plans topay ?$0.16 million in common stock dividends next year. a. Whatare? Cumberland's total financing needs? (that is, total? assets)for the coming? year? b. Given the? firm's projections and dividendpayment? plans, what are its discretionary financing? needs? c.Based on your? projections, and assuming that the? $200,000expansion in fixed assets will? occur, what is the largest increasein sales the firm can support without having to resort to the useof discretionary sources of? financing?
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