Table 1 Year Ended December 31,2006 (Millions of Dollars)

Current assets 104

Fixed assets 160
Total assets 264
Current liabilities (accruals and payables) 40
Long-term debt (7.5 percent) 16
Common stock ($1 par, 10 million shares out) 10
Retained earnings 198
Total liabilities and net worth 264 HJ HJ

Table 2 Year Ended December 31,2006

Sales 254
Cost of goods solda 188
Gross profit 66

General and administrative expenses 9.9

Lease payment on equipment 2.4
Earnings before interest 53.7
Interest charges 1.2
Earnings before tax 52.5
Tax (48 percent, marginal rate federal plus state) 25.2
Net income 27.3
Dividends 6.8
Addition to retained earnings 20.5

Financing Required 34
Addition to Retained Earnings 2007 18

Table 4 Industry Ratios

Debt/total assets 35%
Times-interest-earned 9X
Fixed charge coverage 6X
Profit after taxes/sales 6%
Profit after tax/total assets 8%
Profit after tax/net worth 12%
Price/earnings 18 X
 Option 1
Common Stock Net 32
Funds Needed 34,000,000 Option 2
Stocks to be Issued 1,062,500 Long Term Debt
Return on Assets 2006 0.203 Additional Assets 2007
Return on Assets 2007 0.203 Total Assets 2007
Common Stock $1 par 1,062,500 Return on Assets 2006
Total Assets 2007 265,062,500 Return on Assets 2007
EBIT 2007 53,916,122 EBIT 2007
Interest Charges 1200000 Interest Charges
Earnings Before Tax 52,716,122 Earnings Before Tax
Tax @ 48% 25,303,739 Tax @ 48%
Net Income 27,412,384 Net Income
Dividends - Dividends
Income Attributable to Common Income Attributable to Common
StockHolders 27,412,384 StockHolders
Earnings Per Share 2.74 Earnings Per Share

Fixed Charge Coverage Ratio = (EBIT + Lease Pmt)/(Int Pmt + lease Pmt)

Capital Inc Ratios Option 1 Capital Inc Ratios Option 2

Debt/total assets 6% Debt/total assets
Times-interest-earned 44.93 Times-interest-earned
Fixed charge coverage 15.64 Fixed charge coverage
Profit after taxes/sales Profit after taxes/sales
Profit after tax/total assets 10% Profit after tax/total assets
Profit after tax/net worth 12% Profit after tax/net worth
Price/earnings 13.50 Price/earnings
 Option 3
Preferred Stock Net 30
Option 2 Funds Needed 34,000,000
34 Stocks to be Issued 1,133,333
34 Additional Assets 2007 34
298 Return on Assets 2006 0.203
0.203 Return on Assets 2007 0.203
0.203 Total Assets 2007 298
60,615,909 EBIT 2007 60,615,909
4,600,000 Interest Charges 1200000
56,015,909 Earnings Before Tax 59,415,909
26,887,636 Tax @ 48% 28,519,636
29,128,273 Net Income 30,896,273
- Dividends 6,800,000
Income Attributable to Common
29,128,273 StockHolders 24,096,273
2.91 Earnings Per Share 2.41

c Ratios Option 2 Capital Inc Ratios Option 3

17% Debt/total assets 5%
13.18 Times-interest-earned 50.51
9.00 Fixed charge coverage 17.50
Profit after taxes/sales
10% Profit after tax/total assets 10%
13% Profit after tax/net worth 14%
12.70 Price/earnings 15.36