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I need help with answering D! Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: The company
I need help with answering D!
Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: 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 $3.3 million in additional financing. His investment banker has laid out three plans for him to consider: 1. Sell $3.3 million of debt at 9 percent. 2. Sell $3.3 million of common stock at $15 per share. 3. Sell $1.65 million of debt at 8 percent and $1.65 million of common stock at $20 per share. Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,430,000 per year. Delsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1 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). Note: Enter your answers in dollars not in millions, i.e, \$1,234,567. d. Compute EPS under all three methods of financing the expansion at $7.3 million in sales (first year) and $10.2 million in sales (last year). Note: Round your answers to 2 decimal placesStep by Step Solution
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