Daising Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales $ 5,200,000 Variable costs (50% of sales) 2.600.000 Fored costs 1.820,000 Eamings before interest and taxes (EBIT) $ 780,000 Interest (10% costi 240.000 Eamings before taxes (EBT) $540,000 Tax (40%) 216.000 Eamings after taxes (EAT) $ 324,000 Shares of common stock 220,000 Eamings per share 1.47 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. Daising estimates a need for $2 2 million in additional financing. His investment banker has laid out three plans for him to consider 1. 2. 3. Sell $2.2 million of debt at 10 percent Sell $2 2 million of common stock at $20 per share. Sell $1.10 million of debt at 9 percent and $1.10 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 $2,320,000 per year. Delsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1 million per vear for the next five years Dalsing 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 dollare not in millions, is, $1,234,567.) Break-Even Point Before expansion After expansion b. The degree of operating leverage before and after expansion. Assume sales of $5.2 milion before expansion and $6.2 milion after expansion. Use the formula: DOL(S-TVC)/(S-TVC - FC). (Round your answers to 2 decimal places.) Degree of Operating Leverage Before expansion After expansion 0-1. The degree of financial leverage before expansion (Round your answer to 2 decimal places.) Degree of financial leverage 0-2. The degree of financial leverage for all three methods after expansion. Assume sales of $6.2 million for this question (Round your answers to 2 decimal places.) Degree of Financial Lavenge 100 E d. Compute EPS under all three methods of financing the expansion at 56.2 million in sales (first year) and $10.2 million in sales (last year). (Round your answers to 2 decimal places.) Earnings per Share First War Last War 100% SA Det & SE