Question

(Financial forecasting—discretionary financing needs​)

Fishing​ Charter, Inc. estimates that it invests ​$0.38 in assets for each dollar of new sales.​ However, ​$0.05

in profits are produced by each dollar of additional​ sales, of which ​$0.02 can be reinvested in the firm. If sales rise by

​$300,000 next year from their current level of ​$3 ​million, and the ratio of spontaneous liabilities to sales is

13 ​percent, what will be the​ firm's need for discretionary​ financing? ​(Hint​: In this​ situation, you do not know what the​ firm's existing level of assets​ is, nor do you know how those assets have been financed.​ Thus, you must estimate the change in financing needs and match this change with the expected changes in spontaneous​ liabilities, retained​ earnings, and other sources of discretionary​ financing.)

The​ firm's need for discretionary financing is ​$ ​(Round to the nearest​ dollar.)

Answer 1

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