Phelps Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales $6,100,000 Less: Variable expense (50% of sales) Fixed expense 3,050,000 1,910,000 Earnings before interest and taxes (EBIT) Interest (10% cost) 1,140,000 420,000 Earnings before taxes (EBT) Tax (40%) 720,000 288,000 $432,000 Earnings after taxes (EAT) 310,000 $1.39 Shares of common stock EPS Phelps Canning Company is currently financed with 50 percent debt and 50 percent equity (common stock). To expand facilities, Mr. Phelps estimates a need for $3.1 million in additional financing. His investment dealer has laid out three plans for him to consider: 1. Sell $3.1 million of debt at 13 percent 2. Sell $3.1 million of common stock at $20 per share. 3. Sell $1.55 million of debt at 12 percent and $1.55 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 $2,410,000 per year. Mr. Phelps is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1.55 million per year for the next five years. Mr. Phelps 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 the answers in dollars not in millions.) Break-even point Before expansion After expansion b. The DOL before and after expansion. Assume sales of $6.1 million before expansion and $71 million after expansion. (Round the final answers to decimal places.) DOL Before expansion After expansion c-1. The DFL before expansion at sales of $6.1 million. (Round the final answers to 2 decimal places.) X DFL c-2. The DFL for all three methods after expansion. Assume sales of $7.1 million. (Round the final answers to 2 decimal places.) DFL 100 Debt 100 Equity 50% Debt & 50% Equity X d. Compute EPS under all three methods of financing the expansion at $71 million in sales (first year) and $10.0 million in sales (last year). (Round the final answers to 2 decimal places.) First year Last year EPS 100% Debt 100% Equity 50% Debt & 50% Equity