19 Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: 5 Sales Variable costs (50% of sales) Fixed costs Earnings before interest and taxes (EBIT) Interest (to cost) Earning before taxes (ET) Tax (303 Earnings after tavs (ET) Sharts of Conon stock Tarning per share $ 7,100,000 3,550,000 2,010,000 $1.540,000 520,000 $ 920,000 276,000 $ 646,000 410,000 5 The company is currently financed with 50 percent debt and 50 percent equity common stock, par value of $ 10). In order to expand the facilities Mr. Delsing estimates a need for $41 million in additional financing His investment banker hastaid out three plans for him to consider 15 Salmon of debt til percon 2 Session of common stock 8 520 per share 3 Sell 20 million otettutto percent and 5205 million of common stock at $25 per share Vitacore expected to stay at 50 per we expenses incrone 10 52510000 per 19 The company is currently financed with 50 percent debt and 50 percent equity common stock, par value of 510). In order to expand the facilities, Mr Detsing estimates a need for $11 million in additional financing His investment banker has laid out three plans for him to consider 3 Borts 1. Sell $41 million of debt at 11 percent 2.Sell S41 million of common stock at $20 per share, 3. Sell $2.05 million of debt at 10 percent and $2.05 million of common stock at $25 per share book Hint Pint Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,510,000 per year. Detsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1 million per year for the next five years Delsing is interested in a thorough analysis of his expansion plans and methods of financing He would like you to analyze the following: a. The break-even point for operating expenses before and after expansion (in sales dollars). (Enter your answers in dollars not in millions, L.e. 51,234,567.) Break Even Point Before expansion Aller apansion Check my work b. The degree of operating leverage before and after expansion Assume sales of $71 million before expansion and $81 million after expansion. Use the formula: DOL-(S-Yvq/(S-TVC-FC) (Round your answers to 2 decimal places.) Degree of Operating Leverage Before axpansion Alter expansion 01. The degree of financial leverage before expansion (Round your answer to 2 decimal places.) Degree of financial leverage r. The one that Amd rhieni incind von Prey 1961 Nad 19 c-2. The degree of financial leverage for all three methods after expansion Assume sales of 581 million for this question (Round your answers to 2 decimal places.) 3 Degree of Financial Livrare 1005 Debt 100% Son Debt & 50% Equity d. Compute EPS under all three methods of tiencing the expansion at $81 million in sales (first year) and $10 milion in sales cast year), (Round your answers to 2 decimal places.) Earnings Share First Year at Yox 1001 Debt 100E Dot 50 quity 100% Debt 100% Equity 50% Debt 8 50% Equity d. Compute EPS under all three methods of financing the expansion at $8,1 million in sales (first year) and $11.0 million in sales (las year). (Round your answers to 2 decimal places.) Earnings per Share First Year Last Year 100% Debt 100% Equity 50% Debt 8 50% Equity 19 Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: 5 Sales Variable costs (50% of sales) Fixed costs Earnings before interest and taxes (EBIT) Interest (to cost) Earning before taxes (ET) Tax (303 Earnings after tavs (ET) Sharts of Conon stock Tarning per share $ 7,100,000 3,550,000 2,010,000 $1.540,000 520,000 $ 920,000 276,000 $ 646,000 410,000 5 The company is currently financed with 50 percent debt and 50 percent equity common stock, par value of $ 10). In order to expand the facilities Mr. Delsing estimates a need for $41 million in additional financing His investment banker hastaid out three plans for him to consider 15 Salmon of debt til percon 2 Session of common stock 8 520 per share 3 Sell 20 million otettutto percent and 5205 million of common stock at $25 per share Vitacore expected to stay at 50 per we expenses incrone 10 52510000 per 19 The company is currently financed with 50 percent debt and 50 percent equity common stock, par value of 510). In order to expand the facilities, Mr Detsing estimates a need for $11 million in additional financing His investment banker has laid out three plans for him to consider 3 Borts 1. Sell $41 million of debt at 11 percent 2.Sell S41 million of common stock at $20 per share, 3. Sell $2.05 million of debt at 10 percent and $2.05 million of common stock at $25 per share book Hint Pint Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,510,000 per year. Detsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1 million per year for the next five years Delsing is interested in a thorough analysis of his expansion plans and methods of financing He would like you to analyze the following: a. The break-even point for operating expenses before and after expansion (in sales dollars). (Enter your answers in dollars not in millions, L.e. 51,234,567.) Break Even Point Before expansion Aller apansion Check my work b. The degree of operating leverage before and after expansion Assume sales of $71 million before expansion and $81 million after expansion. Use the formula: DOL-(S-Yvq/(S-TVC-FC) (Round your answers to 2 decimal places.) Degree of Operating Leverage Before axpansion Alter expansion 01. The degree of financial leverage before expansion (Round your answer to 2 decimal places.) Degree of financial leverage r. The one that Amd rhieni incind von Prey 1961 Nad 19 c-2. The degree of financial leverage for all three methods after expansion Assume sales of 581 million for this question (Round your answers to 2 decimal places.) 3 Degree of Financial Livrare 1005 Debt 100% Son Debt & 50% Equity d. Compute EPS under all three methods of tiencing the expansion at $81 million in sales (first year) and $10 milion in sales cast year), (Round your answers to 2 decimal places.) Earnings Share First Year at Yox 1001 Debt 100E Dot 50 quity 100% Debt 100% Equity 50% Debt 8 50% Equity d. Compute EPS under all three methods of financing the expansion at $8,1 million in sales (first year) and $11.0 million in sales (las year). (Round your answers to 2 decimal places.) Earnings per Share First Year Last Year 100% Debt 100% Equity 50% Debt 8 50% Equity