Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales Variable costs (50% of sales) Fixed costs Earnings before interest and taxes (EBIT) Interest (10% cost) Earnings before taxes (EBT) Tax (40%) Earnings after taxes (EAT) Shares of common stock Earnings per share $ 5,500,000 2,750,000 1,850,000 $ 900,000 300,000 $ 600,000 240,000 $ 360,000 250,000 $ 1.44 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 $2.5 million in additional financing. His investment banker has laid out three plans for him to consider: 1. Sell $2.5 million of debt at 13 percent. 2. Sell $2.5 million of common stock at $20 per share. 3. Sell $1.25 million of debt at 12 percent and $1.25 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 $2,350,000 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 year for the next five years. Delsing 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). Note: Enter your answers in dollars not in millions, i.e, $1,234,567. Break-Even Point Before expansion After expansion $ 3,700,000 $ 4,700,000 b. The degree of operating leverage before and after expansion. Assume sales of $5.5 million before expansion and $6.5 million after expansion. Use the formula: DOL = (S- TVC) / (S TVC FC). Note: Round your answers to 2 decimal places. Before expansion After expansion Degree of Operating Leverage 3.06 3.76 b. The degree of operating leverage before and after expansion. Assume sales of $5.5 million before expansion and $6.5 million after expansion. Use the formula: DOL = (S - TVC) / (S TVC FC). Note: Round your answers to 2 decimal places. Degree of Operating Leverage Before expansion After expansion 3.06 3.76 c-1. The degree of financial leverage before expansion. Note: Round your answer to 2 decimal places. Degree of financial leverage 1.50 c-2. The degree of financial leverage for all three methods after expansion. Assume sales of $6.5 million for this question. Note: Round your answers to 2 decimal places. 100% Debt 100% Equity 50% Debt & 50% Equity Degree of Financial Leverage 2.56 1.41 1.78 d. Compute EPS under all three methods of financing the expansion at $6.5 million in sales (first year) and $10.5 million in sales (last year). Note: Round your answers to 2 decimal places. 100% Debt 100% Equity 50% Debt & 50% Equity Earnings per Share First Year Last Year