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(Financial forecasting - discretionary financing needs) Brigman Industries is evaluation its financing

requirements for the coming year. The firm has been in business for 1 year, and the CFO expects that the relationship between firm sales and its operating expenses, current assets, its assets, and current liabilities will remain at their current proportion of sales.

Last year Brigman had $12 million in sales and net income of $1.2 million. The firm anticipates that next year's sales will reach $18 million, with net income rising to $2 million. Given its present high rate of growth, the firm retains all its earnings to help defray the cost of new investments.

The firm's balance sheet for 2015 is shown in the following table:


Table for Acc.png


Estimate Brigman's financing requirements (that is, total assets) for 2016 and its discretionary financing needs (DFN). 

Table for Acc.png

Brigman Industries Inc.
BALANCE SHEET
12/31/2015
% OF SALES
Current assets
$ 2,000,000
17%
Net fixed assets
8,000,000
67%
Total
$ 10,000,000
LIABILITIES AND OWNERS' EQUITY
Accounts payable
$ 3,000,000
25%
Long-term debt
2,000,000
NA
Total liabilities
$ 5,000,000
Common stock
1,000,000
NA
Paid-in capital
1,800,000
NA
Retained earnings
1,200,000
Common equity
4,000,000
Total
$10,000,000

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