ces Phelps Canning Company is considering an expansion of its facilities. Its current income statement is as follows. Sales Less: Variable expense (50% of sales) Fixed expense Earnings before interest and taxes (EBIT) Interest (10% cost) Earnings before taxes (EBT) Tax (34%) Earnings after taxes (EAT) Shares of common stock EPS $ $ $ 5,000,000 2,500,000 1,800,000 Break-even point before expansion Break-even point after expansion 700,000 200,000 500,000 170,000 330,000 200,000 1.65 Phelps Canning Company is currently financed with 50 percent debt and 50 percent equity (common stock). To expand facilities 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. Phelp 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 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 not in million of dollars.) $3600000 $460000C