Client Pushing his luck?

I just received an email from a prospective client:

I’m wondering if you can assist me, we are looking at redoing our letterheads. I’ve attached our old horrible letter head as well as two examples of our new logo’s that we would like used. Can you perhaps put something together for us to have a look at.

The way I read and understand this email is they want us to create something for them to look at, then they will decide if they like it enough to pay for it.
Do you read this the same way?

I am honestly not sure how to approach this response without chasing the client away.

Any thoughts on this?