Delsing Canning Company is considering an expansion of its facilihes. Its Turrent inome Statement is as follows Sales $5,200.000 Variable Cost (50% ofsales) 2. 600,000 Fixed Cost 1,820.000 EBIT Emmings Before tox and Interest 780,000 Interest (10% Cost) * 240.000 EBT Earning Before tax 540,000 tax (40%) 210,000 Earnings after Tax (EAD) * 324.000 Shares of Common Stock 220.000 Faming per Share 61.47 The company is currently financed with 50% debt order to expand the faulities, Mr. Desling estimates a need for shed million in additional financing. His investment banker has laid out three plans 1. Sell 2.2 million of debt at 10% 12. Sella. 2 million of common stock at 820 per share 13 Sell 1.10 million of debt at 9% and 1.10 million of common stock @ #25 per share Variable Costs are expected to stay at 50% of Sales, while fixed expenses will increase to 192,320,000 per year. Desling 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 5 years. Desling is interested in a thorough analysis of his expansion plans and methods of finanung. He would like you to analyze the following A. The break even point for operating expenses before o and after expansion Break even Point Before SX, XXX XXX After b. The degree of operating loverage, before and after expansion. Assume Sales of 45. I million before expansion and 6.2 million offer expansion Use forfricta DOLE (S-TVC) IS-TVC-FC) Before After Degree of Operating Leverge 1. The degree of financial leverage before expansion Degree of finance Leverage ca. The degree of financial leverage for all three methods after expansion. Assume sales of 6.2 million. for this question. Degree of financial leverage 1 100% debt 11000 equity 50% debt a 50ro equity 3. Compute EPS under all three methods of finoning the expansin at 6.2 million is sales (first year and 10.2 million in sales (last year) farning Per Share (100% debt 100% equity 5070 debt 4 50 % equity First year & Last year)