3. (16 pts.) Charline, president of IT Manufacturing Inc., is preparing a proposal to present to her board of directors regarding a planned plant expansion that will cost $50 million. At issue is whether the expansion should be financed with debt (a long-term note at First National Bank of ACM with an interest of 15%) or through the issuance of common stock (200,000 shares at $50 per share). IT Manufacturing Inc. currently has a capital structure of: Debt (12% interest) Equity 40,000,000 60,000,000 The firm's most recent income statement is presented next: Sales $100,000,000 Cost of goods sold 65,000,000 Gross Profit 35,000,000 Operating expenses 20.000.000 Operating profit 15,000,000 Interest expense 4.800.000 Earnings before tax 10,200,000 Income tax expense (40%) 4,080,000 Net Income 6.120.000 Earnings per share 7.65 (800,000 shares) Charline is aware that financing the expansion with debt will increase visk but could also benefit shareholders through financial leverage. Estimates are that the plant expansion will increase operating profit by 20%. The tax rate is exrected to stay at 40%. Assume a 100% dividend Rayout. a. Calculate the new operating income and net income for the two different options.[4pts) b. Calculate the debt ratio times interest earned earnings, per share, operating return on assets return an equity. assuming the expected increase in operating profit is realized, for the debt scenario and the equity scenario.(10pts)