Pheips Canning Company is considering an expansion of its facilities. Its current income statement is as follows:

Phelps Canning Company is currently financed wim $50$ percent debt and $50$ percent equily $($common stock$).$ To expand tacilities, Mr$.$ Phelps

estimates a need for $$2$ mililion in additional financing. His investment dealer has laid out three plans for him to consider.

Sell $$2$ million of debt at $13$ percerst.

Sell $$2$ million of common stock at $$20$ per share.

Sell $$1$ million of debt at $12$ percent and $$1$ million of common stock at $$25$ per share.

Variable costs are expected to stay at $50$ percent of sales, while fixed expenses will increase $10$$$2,300,000$ per year. Mir. Phelps is not sure how

much this expansion willi add to sales, but he estimates that sales will rise by $$1$ million per year for the next five years. Mr$.$ Pheips is interested

in a thorough anabsts of his expansion plans and methods of firancing

Compute the breakeven point for operating expenses before and affer expansion $($in sales dollars$).($Entar your answers in $$ollars$,$ not is

million of dollars.$)$

Break$-$even point before expansion

Break$-$even point after exparaion

b$.$ Compute the degree of operating leverage $($DOL$)$ before and after expansion. Assume sales of $$5$ million before expansion and $$6$

after expansion. $($Round the final answer to $2$ decimal places.$)$

DOL before expansion

DOL after expansion

c$.$ Compute the degree of financial leverage $($DFL$)$ before expansion at sales of $$5$ miltion and for all three methods of financing

Assume sales of $$6$ million for the second part of this question. $($Round the final answer to $2$ decimal places.$)$

DFL belore expansion

DFL after expansion $100\%$ Dabt

DFL atter expansion $100\%$ Equily

DFL after expansion $50\%$ Debt and Equity