can you answer paet d only

Phelps Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales $ Less: Variable expense (50% of sales) 5,000,000 2,500,000 1,800,000 Fixed expense 700,000 Earnings before interest and taxes (EBIT) Interest (10% cost) 200,000 Earnings before taxes (EBT) 500,000 Tax (34%) 170,000 Earnings after taxes (EAT) $ 330,000 Shares of common stock EPS 200,000 1.65 $ ces 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 million in additional financing. His investment dealer has laid out three plans for him to consider: 1. Sell $2 million of debt at 13 percent. 2. Sell $2 million of common stock at $20 per share. 3. Sell $1 million of debt at 12 percent and $1 million of common stock at $25 per share. Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,300,000 per year. Mr. Phelps 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. Mr. Phelps is interested in a thorough analysis of his expansion plans and methods of financing. a. Compute the break-even point for operating expenses before and after expansion (in sales dollars). (Enter your answers in dollars, not in million of dollars.) Break-even point before expansion $3600000 $4600000 Break-even point after expansion b. Compute the degree of operating leverage (DOL) before and after expansion Assume sales of $5 million before expansion and $6 million after expansion. (Round the final answer to 2 decimal places.) DOL before expansion 3.57 x 4.29 x DOL after expansion c. Compute the degree of financial leverage (DFI) before expansion at sales of $5 million and for all three methods of financing after I a. Compute the break-even point for operating expenses before and after expansion (in sales dollars). (Enter your answers in dollars, not in million of dollars.) Break-even point before expansion $3600000 $4600000 Break-even point after expansion b. Compute the degree of operating leverage (DOL) before and after expansion. Assume sales of $5 million before expansion and $6 million after expansion. (Round the final answer to 2 decimal places.) DOL before expansion 3.57x 4.29 DOL after expansion c. Compute the degree of financial leverage (DFL) before expansion at sales of $5 million and for all three methods of financing after expansion. Assume sales of $6 million for the second part of this question. (Round the final answer to 2 decimal places.) DFL before expansion 1.4 DFL after expansion 100% Debt 2.92 DFL after expansion 100% Equity 1.40 1.84 DFL after expansion 50% Debt and Equity d. Compute EPS under all three methods of financing the expansion at $6 million in sales (first year) and $10 million in sales (last year). (Round the final answer to 2 decimal places.) Debt Equity Debt and Equity 105 EPS for the first year 0.79 1.10 EPS for the last year 7.39 e. Select the method for financing the expansion that best suits Mr. Phelps' objective of maximizing sharehold Best method for financing before expansion Plan 2 Plan 1 Best method for financing after expansion