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Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales $ 6 , 3 0 0 ,

Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows:
Sales $ 6,300,000
Variable costs (50% of sales)3,150,000
Fixed costs 1,930,000
Earnings before interest and taxes (EBIT) $ 1,220,000
Interest (10% cost)460,000
Earnings before taxes (EBT) $ 760,000
Tax (35%)266,000
Earnings after taxes (EAT) $ 494,000
Shares of common stock 330,000
Earnings per share $ 1.50
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 $3.3 million in additional financing. His investment banker has laid out three plans for him to consider:
Sell $3.3 million of debt at 9 percent.
Sell $3.3 million of common stock at $15 per share.
Sell $1.65 million of debt at 8 percent and $1.65 million of common stock at $20 per share.
Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,430,000 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:d. Compute EPS under all three methods of financing the expansion at $7.3 million in sales (first year) and $10.2 million in sales (last year).
Note: Round your answers to 2 decimal places.

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