(Discretionary financing needs) In the spring of 2013 the Caswell Publishing Com

Question

(Discretionary financing needs) In the spring of 2013 the Caswell Publishing Company estabishled a custom publishing business for its business clients. These clients consisted principally of small-to-medium-size companies in Round Rock, Texas. However, the company's plans were disrupted when they landed a large printing contract from Dell Computers Corp (DELL) that they expected woudl run for several years. Specifically, the new contact would increast firms revenues by 100 percent. Consequently, Caswell's management knew they would need to make some significat changes in the firm capcity, and quickly. The followining balance sheet from 2013 and pro forma balance sheet from 2014 reflect the firm's estimates of the financial impact of the 100% revenue growth.

a. how much new discretionary financing will Caswell requrire bassed on the above estimates?
b. given the nature of the new contact and the specific needs for financing that the firm expects, what recommendations might you offer to the firm's chief financial officer as to specfic sources of financing the firm should seek to fulfill its DFN? select the choices that apply

retained earnings
long-term debt
common stock
notes payable
sale of fixed assets

ballance sheet pro forma ballance sheet curent assets 12,070,000 current assets $24,140,000 Net Fixed assets 17,790,000 net fixed assets 35,580,000 total $28,860,00 total $59,720,000 accounts payable $1,920,000 accounts payable $3,840,000 accrued expenses 1,910,000 accrued expenses 3,820,000 notes payable 1,410,000 notes payable 1,410,000 current liabilities $5,240,000 current liabilities $9,070,000 long term debt 6,520,000 long-term debt 6,520,000 total liablities $11,760,000 total liabilities $15,590,000 common stock (par) 1,020,000 common stock (par) 1,020,000 paid in capital 2,040,000 paid-in-capital 2,040,000 retained earnings 15,040,000 retained earnings 15,040,000 common equity $18,100,000 common equity $18,100,00 total 29,860,000 projected sources of financing $33,690,000

Explanation / Answer

Total asset in next year = 59,720,000
Total liabilities in current year = 15,590,000
Total equity in current year = 18,100,000 (Note that this value is printed wrong in question, sum of components of equity do not match up with total equity)

Discretionary financing needed = Projected assets - projected liabilities - projected equity
= 59720000 - 15590000 - 18100000 = 26,030,000

B. Sources of discretionary financing are =
retained earnings
Notes payables
Long term debt
Common stock

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