DeSoto Tools Inc. is planning to expand production. The expansion will cost $4,100,000, which can be financed either by bonds at an interest rate of 12 percent or by selling 82,000 shares of common stock at $50 per share. The current income statement before expansion is as follows DESOTO TOOLS INC. Income Statement 20X1 Sales Variable costs Fixed costs Earnings before interest and taxes Interest expense Earnings before taxes Taxes 30% Earnings after taxes Shares Earnings per share $3,230,000 1,292.000 821,090 $1,117,800 610,890 $ 5e7, 8e 152, 100 5354,900 310,000 1.14 After the expansion, soles are expected to increase by $1710,000 Variable costs will remain at 40 percent of sales, and fixed costs will increase to $1,392.000. The tax rate is 30 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 formulo DOL=(5-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 lovers b. Construct the income statement for the two alternative financing plans (Round EPS to 2 decimal places.) Debt Equity Common Shares Earnings per share c. Calculate the degree of operating leverage, the degree of financial leverage and the degree of combined leverage, after expansion (Round your answers to 2 decimal places.) Debt Equity Degree of operating leverage Dogree of financial leverage Degree of combined leverage DeSoto Tools Inc. is planning to expand production. The expansion will cost $4,100,000, which can be financed either by bonds at an interest rate of 12 percent or by selling 82,000 shares of common stock at $50 per share. The current income statement before expansion is as follows: DESOTO TOOLS INC Income Statement 20X1 Sales Variable costs Fixed costs Earnings before interest and taxes Interest expense Earnings before taxes Taxes 30% Earnings after taxes Shares Earnings per share $3,230,000 1,292,800 821,000 $1,117,000 610.000 $ 507,000 152.100 $ 354,900 310,000 After the expansion, sales are expected to increase by $1.710000 Variable costs will remain at 40 percent of sales and fixed costs will increase to $1,392,000. The tax rate is 30 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 b. Construct the income statement for the two alternative financing plans (Round EPS to 2 decimal places.) Debt Equity Common shares Earnings per share c. Calculate the degree of operating leverage, the degree of financial leverage, and the degree of combined leverage, after expansion (Round your answers to 2 decimal places.) Debt Equity Degree of operating leverage Degree of financial leverage Degree of combined leverage