E-10 Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows:

Sales	$	5,500,000
Variable costs (50% of sales)		2,750,000
Fixed costs		1,850,000
Earnings before interest and taxes (EBIT)	$	900,000
Interest (10% cost)		300,000
Earnings before taxes (EBT)	$	600,000
Tax (40%)		240,000
Earnings after taxes (EAT)	$	360,000
Shares of common stock		250,000
Earnings per share	$	1.44

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 $2.5 million in additional financing. His investment banker has laid out three plans for him to consider:

1. Sell $2.5 million of debt at 13 percent.
2. Sell $2.5 million of common stock at $20 per share.
3. Sell $1.25 million of debt at 12 percent and $1.25 million of common stock at $25 per share.

Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,350,000 per year. Delsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1.25 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:

a.The break-even point for operating expenses before and after expansion (in sales dollars).(Enter your answers in dollars not in millions, i.e, $1,234,567.)

b.The degree of operating leverage before and after expansion. Assume sales of $5.5 million before expansion and $6.5 million after expansion. Use the formula: DOL = (STVC) / (STVC FC).(Round your answers to 2 decimal places.)

c-1.The degree of financial leverage before expansion.(Round your answers to 2 decimal places.)

c-2.The degree of financial leverage for all three methods after expansion. Assume sales of $6.5 million for this question.(Round your answers to 2 decimal places.)

d.Compute EPS under all three methods of financing the expansion at $6.5 million in sales (first year) and $10.5 million in sales (last year).(Round your answers to 2 decimal places.)