High Sky, Inc., a hot-air balloon manufacturing firm, currently has the following simplified balance sheet:

		Assets		Liabilities and Capital
Total Assets		$ 1,100,000		Bonds (10% interest)				$ 600,000
				Common Stock at par ($3), 100,000
				shares outstanding				$ 300,000
				Contributed capital in excess of par				$ 100,000
				Retained earnings				$ 100,000
				Total libalities and capital				$ 1,100,000

The company is planning an expansion that is expected to cost $600,000. The expansion can be financed with new equity (sold to net the company $4 per share) or with the sale of new bonds at an interest rate of 11 percent. (The firm