DeSoto Tools Incorporated is planning to expand production. The expansion will cost $$2,300,000,$ which can be financed either by bonds at an interest rate of $10$ percent or by selling $46,000$ shares of common stock at $$50$ per share. The current income statement before expansion is as follows:

DESOTO TOOLS INCORPORATED

Income Statement $20$X$1$

Sales $ $3,030,000$

Variable costs $1,212,000$

Fixed costs $803,000$

Earnings before interest and taxes $ $1,015,000$

Interest expense $430,000$

Earnings before taxes $ $585,000$

Taxes @ $40\%234,000$

Earnings after taxes $ $351,000$

Shares $130,000$

Earnings per share $ $2\mathrm{.}70$

After the expansion, sales are expected to increase by $$1,530,000.$ Variable costs will remain at $40$ percent of sales, and fixed costs will increase to $$1,356,000.$ The tax rate is $40$ percent.

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$$FC$$I$)$

$.$ These instructions apply throughout this problem.$)$

Note: Round your answers to $2$ decimal places.

Construct the income statement for the two alternative financing plans.

Note: Round EPS to $2$ decimal places. Enter your answers as positive values.

Calculate the degree of operating leverage, the degree of financial leverage, and the degree of combined leverage, after expansion.

Note: Round your answers to $2$ decimal places.