answer of d part

Help Phelps Canning Company is considering an expansion of its facilities. Its current income statement is as follows: $5,300,000 2,650,000 1,830,000 820,000 260,000 Sales Less: Variable expense (50% of sales) Fixed expense Earnings before interest and taxes (EBIT) Interest (10% cost) Earnings before taxes (EBT) Tax (309) Earnings after taxes (EAT) Shares of common stock EPS 560,000 168,000 $392,000 230,000 $1.70 Phelps Canning Company is currently financed with 50 percent debt and 50 percent equity (common stock). To expand facilities, Mr. Phelps estimates a need for $2.3 million in additional financing. His investment dealer has laid out three plans for him to consider: 1. Sell $2.3 million of debt at 11 percent. 2. Sell $2.3 million of common stock at $25 per share. 3. Sell $1.15 million of debt at 10 percent and $115 million of common stock at $40 per share. Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,330,000 per year Mr. Phelps is not sure how much this expansion will add to sales, but he estimates that sales will rise by $115 million per year for the next five years. Mr. Phelps 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 the answers in dollars not in millions.) b. The DOL before and after expansion. Assume sales of $5.3 million before expansion and $6.3 million after expansion (Round the final answers to 2 decimal places.) Before expansion After expansion DOL 3.23 X 3.84 X c-1. The DFL before expansion at sales of $5.3 million. (Round the final answers to 2 decimal places.) DFL 146 X c-2. The DFL for all three methods after expansion. Assume sales of $6.3 million (Round the final answers to 2 decimal places.) 100 Debt 1004 Equity 504 Debt & 50% Equity DFL 267 X 146 X 184 X d. Compute EPS under all three methods of financing the expansion at $6.3 million in sales (first year) and $10.3 million in sales (last year). (Round the final answers to 2 decimal places.) EPS First year Last year 100 Debt $ 100% Equity 50% Debt & 504 Equity e. Not available in Connect