I would like someone to go over and see if I used the right
configurations, ratios... etc.  If not, please explain where I went
wrong.

2005 Income Statement:
Sales		$1,000 (40% of average assets)
Costs		     750 (75% of sales)
Interest		       25 (5% of debt as start of year)
		______
Pretax Profit	      225
Tax		        90 (40% of pretax profit)

Net Income	$  135


Balance Sheet:
Assets	$2600			Debt	$500
				Equity 	2100	
Total	$2600				$2600




Summarizes the 2005 income statement and end-year balance sheet of
Drake?s Bowling Alleys. Drake?s financial manager forecasts a 10
percent increase in sales and costs in 2006. The ratio of sales to
average assets is expected to remain at .40. Interest is forecasted at
5 percent of debt at start of year.

1)  What is the implied level of assets at the end of 2006?  
Assets = 2600
Sales = 1,100 (with 10% increase)
Cost =  825 (with 10% increase)

Implied level of Assets = 2,860

2)  If the company pays out 50 percent of net income as dividends, how
much cash will
Drake need to raise in the capital markets in 2006?

Net income = $135   50% = $67.5
Drake will need to use a Profitability ratio, to assist with the determination:
After Drake pays out, this will leave $67,500

Drake will need to raise by 6 ? 7%

3)   If Drake is unwilling to make an equity issue, what will be the
debt ratio at the end
of 2006?
Debt ratio = (LT debt +Leases) / (LT debt + Leases + Equity)
There is no mention of leases so:
500/500+2100 = 0.19  or 19%