Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows:

Sales	$ 7,100,000
Variable costs (50% of sales)	$ 3,550,000
Fixed costs	$ 2,010,000
Earnings before interest and taxes (EBIT)	$ 1,540,000
Interest (10% cost)	$ 620,000
Earnings before taxes (EBT)	$ 920,000
Tax (30%)	$ 276,000
Earnings after taxes (EAT)	$ 644,000
Shares of common stock	410,000
Earnings per share	$ 1.57

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 $4.1 million in additional financing. His investment banker has laid out three plans for him to consider:

1. Sell $4.1 million of debt at 11 percent.
2. Sell $4.1 million of common stock at $20 per share.
3. Sell $2.05 million of debt at 10 percent and $2.05 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 $2,510,000 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:

REQUEST FROM EXPERTS - NEED ASSISTANCE WITH PART D: (Please show work)

d. Compute EPS under all three methods of financing the expansion at $8.1 million in sales (first year) and $11.0 million in sales (last year). (Round your answers to 2 decimal places.) X Answer is complete but not entirely correct. Earnings per Share First Year Last Year 100% Debt $ 0.80 $ 3.28 1.12 X $ 2.89 X 100% Equity 50% Debt & 50% Equity $ $ 1.02 3.08 a. The break-even point for operating expenses before and after expansion (in sales dollars). (Enter your answers in dollars not in millions, i.e, $1,234,567.) Answer is complete and correct. Break-Even Point $ Before expansion After expansion 4,020,000 5,020,000 $ b. The degree of operating leverage before and after expansion. Assume sales of $7.1 million before expansion and $8.1 million after expansion. Use the formula: DOL = (S-TVO)/(S-TVC - FC). (Round your answers to 2 decimal places.) Answer is complete and correct. Degree of Operating Leverage 2.31 Before expansion After expansion 2.63 C-1. The degree of financial leverage before expansion. (Round your answer to 2 decimal places.) Answer is complete and correct. Degree of financial leverage 1.67 c-2. The degree of financial leverage for all three methods after expansion. Assume sales of $8.1 million for this question. (Round your answers to 2 decimal places.) Answer is complete and correct. Degree of Financial Leverage 100% Debt 3.28 1.67 100% Equity 50% Debt & 50% Equity 2.15