Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales $ 7,000,000 Less: Variable expense (50% of sales) 3,500,000 Fixed expense 2,000,000 Earnings before interest and taxes (EBIT) 1,500,000 Interest (10% cost) 600,000 Earnings before taxes (EBT) 900,000 Tax (40%) 360,000 Earnings after taxes (EAT) $ 540,000 Shares of common stock 400,000 Earnings per share $ 1.35 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. Delsing estimates a need for $4.0 million in additional financing. His investment banker has laid out three plans for him to consider: 1.Sell $4.0 million of debt at 10 percent. 2.Sell $4.0 million of common stock at $20 per share. 3.Sell $2.00 million of debt at 9 percent and $2.00 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 $2,500,000 per year. Delsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $2.00 million per year for the next five years. Delsing is interested in a thorough analysis of his expansion plans and methods of financing. (a) The break-even point for operating expenses before and after expansion. (Enter your answers in dollars not in millions. Omit the "$" sign in your response.) Break-even point Before expansion $ After expansion $ (b) The degree of operating leverage before and after expansion. Assume sales of $7.0 million before expansion and $8.0 million after expansion. (Enter only numeric values rounded to 2 decimal places.) Degree of operating leverage Before expansion After expansion (c-1) The degree of financial leverage before expansion. (Enter only numeric value rounded to 2 decimal places.) Degree of financial leverage (c-2) The degree of financial leverage for all three methods after expansion. Assume sales of $8.0 million for this question. (Round your answers to 2 decimal places.) Degree of financial leverage 100% Debt 100% Equity 50% Debt & 50% Equity (d) Compute EPS under all three methods of financing the expansion at $8.0 million in sales (first year) and $10.9 million in sales (last year). (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Earnings per share First year Last year 100% Debt $ $ 100% Equity 50% Debt & 50% Equity