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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 $
Variable costs of sales
Fixed costs
Earnings before interest and taxes EBIT $
Interest cost
Earnings before taxes EBT $
Tax
Earnings after taxes EAT $
Shares of common stock
Earnings per share $
The company is currently financed with percent debt and percent equity common stock, par value of $ In order to expand the facilities, Mr Delsing estimates a need for $ million in additional financing. His investment banker has laid out three plans for him to consider:
Sell $ million of debt at percent.
Sell $ million of common stock at $ per share.
Sell $ million of debt at percent and $ million of common stock at $ per share.
Variable costs are expected to stay at percent of sales, while fixed expenses will increase to $ per year. Delsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $ 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 $ million in sales first year and $ million in sales last year
Note: Round your answers to decimal places.
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