Meltzer Electronics estimates that its total financing needs for the coming year will be $34.5 million. During the coming fiscal year, the firm's required financing payments on its debt-and-equity financing will total $12.9 million. The firm's financial manager estimates that operating cash flows for the coming year will total $33.7 million and that the following changes will occur in the accounts noted.
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Account
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Forecast Change
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Gross fixed assets
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$8.9 million
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Change in current assets
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+2.3 million
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Change in accounts payable
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+1.3 million
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Change in accrued liabilities
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+0.8 million
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a. How much of the free cash flow will the firm have available as a source of new internal financing in the coming year?
b. How much external financing will Meltzer require during the coming year to meet its total forecast financing need?