DeSoto Tools Incorporated is planning to expand production. The expansion will cost $$3,300,000,$ which can be financed either by bonds at an interest rate of $8$ percent or by selling $66,000$ shares of common stock at $$50$ per share. The current income statement before expansion is as follows:

DESOTO TOOLS INCORPORATED

Income Statement $20$X$1$

Sales $ $3,130,000$

Variable costs $1,252,000$

Fixed costs $813,000$

Earnings before interest and taxes $ $1,065,000$

Interest expense $530,000$

Earnings before taxes $ $535,000$

Taxes @ $30\%160,500$

Earnings after taxes $ $374,500$

Shares $230,000$

Earnings per share $ $1\mathrm{.}63$

After the expansion, sales are expected to increase by $$1,630,000.$ Variable costs will remain at $20$ percent of sales, and fixed costs will increase to $$1,376,000.$ The tax rate is $30$ 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.