DeSoto Tools Inc. is planning to expand production. The expansion will cost $2,900,000, which can be financed either by bonds at an interest rate of 6 percent or by selling 58,000 shares of common stock at $50 per share. The current income statement before expansion is as follows: DESOTO TOOLS INC. Income Statement Sales 20x1 $3,090,000 Variable costs Fixed costs Earnings before interest and taxes Interest expense Earnings before taxes Taxes 40% Earnings after taxes Shares 927,000 809,000 $1,354,000 490,000 $ 864,000 345,600 $ 518,400 190,000 2.73 Earnings per share After the expansion, sales are expected to increase by $1,590,000. Variable costs will remain at 40 percent of sales, and fixed costs will increase to $1,368,000. The tax rate is 40 percent. a. Calculate the degree of operating leverage, the degree of financial leverage, and the degree of combined leverage before expansion. (For the degree of operating leverage, use the formula: DOL (S-TVC)/(S-TVC - FC). For the degree of combined leverage, use the formula: DCL (S-TVC)/(S-TVC-FC). These instructions apply throughout this problem.) (Round your answers to 2 decimal places.) Degree of operating leverage Degree of financial leverage Degree of combined leverage