1. The most recent financial statements for GPS, Inc., are shown here:

Income Statement		Balance Sheet
Sales	$19,500		Assets	$98,000	Debt	$52,500
Costs	15,000				Equity	45,500
Taxable income	$4,500		Total	$98,000	Total	$98,000
Taxes (40%)	1,800
Net income	$2,700

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,400 was paid, and the company wishes to maintain a constant payout ratio. Next year's sales are projected to be $21,840. What is the external financing needed?

2. Federer Corp. has issued a bond which carries an 9 percent coupon and paid semiannually. The face value of its bond is $1,000, and the bond mature in 13 years. If the bond is priced to yield 8% so,

a. What is the price of Microchirp Corp's bond?

b. What would be the price of the bond if the yield rose to 1%?

c. What is the current yield on the bond if the YTM is 7%?

d. Explain the meaning your result?

3.The Ewald Company has just paid a cash dividend of $2.40 per share. If you want to buy Ewald's stock at the market, what would you pay for each share if you want a required return of your investment at 12 percent per annum? You believe that The Ewald Company will keep paying dividends at constant grow rate of 5 percent per annum.

4. Titan Mining Corporation has 14 million shares of common stock outstanding, 900,000 shares of 9 percent preferred stock outstanding. Titan Mining also has 210,000 bonds outstanding with par value $1,000 each and the bonds have 17 years to maturity. The bond currently sell for 91 percent of par and has cost of debt before-tax of 11 percent. The common stock currently sells for $34 per share and has a beta of 1.15, the preferred stock currently sells for $80 per share,. The market risk premium is 11.5 percent, T-bills are yielding 7.5 percent, and the firm's tax rate is 32 percent. What is the corporation weighted average cost of capital?