Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: $ 6,300,000 3,150,000 1,930,000 $ 1,220,000 460,000 $760,000 266,000 $ 494,000 Sales Variable costs (50% of sales) Fixed costs Earnings before interest and taxes (EBIT) Interest (10% cost) Earnings before taxes (EBT) Tax (35%) Earnings after taxes (EAT) Shares of common stock Earnings per share 330,000 $ 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: 1. Sell $3.3 million of debt at 9 percent. 2. Sell $3.3 million of common stock at $15 per share. 3. 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:

Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: 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: 1. Sell $3.3 million of debt at 9 percent. 2. Sell $3.3 million of common stock at $15 per share. 3. 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 o thorough analysis of his expansion plans and methods of financing. He would like you to analyze the following: The degree of operating leverage before and after expansion. Assume sales of $6.3 million before expansion ond $7.3 villion after expansion. Use the formula: DOL =(STVCVC)(STVC). tote: Round your answers to 2 decimal places. Answer is complete but not entirely correct. c.1. The degree of financial leverage before expansion. Note: Round your answer to 2 decimal places. Answer is complete but not entirely correct. c-2. The degree of financial leverage for all three methods after expansion. Assume sales of $7.3 million for this question. Note: Round your answers to 2 decimal places. 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