none of these are correcr

Wingler Communications Corporation (WCC) produces airpods that sell for $28.90 per set, and this year's sales are expected to be 440,000 units. Variable production costs for th expected sales under present production methods are estimated at $10,200,000, and fxed production (operating) costs at present are $1,560,000. WCC has $4,800,000 of debt outstanding at an interest rate of 8%. There are 240,000 shares of common stock cutstanding, and there is no preferred stock. The dividend payout ratlo is 70%, and wec is in the 25% federal-plus state tax bracket. WCC is a small company with average sales of $25 million or less during the past 3 years, so it is exempt from the interest deduction limitation. The company is considering investing $7,200,000 in new equipment, Sales would not increase, but variabie costs per unit would decline by 20$8. Also, fixed operating costs would increase from $1,560,000 to $1,800,000. WCC could raise the required capital by borrowing $7,200,000 at 10% or by selling 240,000 additional shares of common stock at $30 per share. a. What would be WCCs EPS (1) under the old production process, (2) under the new process if it wses debt, and (3) under the new process ir it uses common stock? Do not roun intermediate calculations. Round your answers to the nearest cent. 1. 5 2.5 3. s b. At what unit sales level would WCC have the same EPS assuming it undertakes the investment and finances it with debt or with stock? (Hint: V = variable cost per unst = $8,160,000/440,000, and EPS=[(PQVQF1)(1T)DN. Set EPSseock = EPSobet and solve for Q. Do not round interrnedute calculabons. Hound your answer to the nearest whole number. (3) units C. At what unit sales level would LPS w 0 under the three productionyfinancing setups - that is, under the old plan, the new plan with debt finanong, and the new plan with stock financing? (Hint: Note that Vois = $10,200,000/440,000, and use the hints for part b, setting the EPS equation equal to rero.) Do not round intermediate calculations. found your answers to the nearest whole numbec Oid plan: Nes plan with debt francing: units New plan with stock financing units a. On the basis of the analyas in parts a through c, and given that operating leverage is lower under the new setup, which plan is the rakiem, which nas the higheit expected tes, and which would you recommend? Astume that there is a fairly Nigh probability of sales fahang as low as 250,000 units. Determine EPSoete and EPSywak at that sales level to help astess the risiness of the two financing plans. Negative values should be indicated by a minus sign, Do hot round intermediate calculations, found your answers to the nearest cent. EDsbebt: $ EMStiouls