Phelps Canning Company is considering an expansion of its facilities. Its current income statement is as follows: $5,700,000 2,850,000 1,870,000 Sales Less: Variable expense (50% of sales) Fixed expense Earnings before interest and taxes (EBIT) Interest (10% cost) Earnings before taxes (EBT) Tax (35%) 980,000 340,000 640,000 224,000 Earnings after taxes (EAT) $416,000 Shares of common stock EPS 270,000 $1.54 W 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 $2.7 million in additional financing. His Investment dealer has laid out three plans for him to consider 1. Sell $2.7 million of debt at 9 percent 2. Sell $2.7 million of common stock at $25 per share 3. Sell $1.35 million of debt at 8 percent and $1,35 million of common stock at S30 per share Variable costs are expected to stay at 50 percent of sales while fixed expenses will increase to $2.370,000 per year. Mr. Phelps is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1,35 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 $5.7 million before expansion and 56.7 million after expansion (Round the final answers to 2 decimal places.) DOL Before expansion After expansion X C-1. The DFL before expansion at sales of $5.7 million (Round the final answers to 2 decimal places.) DFL c-2. The DFL for all three methods after expansion. Assume sales of $6.7 million (Round the final answers to 2 decimal places.) DAL 100% Det 100% taust 50 Debt 503 Equity x d. Compute EPS under all three methods of financing the expansion at $6.7 million in sales (first year) and $10.7 million in sales (last year). (Round the final answers to 2 decimal places.) First year Last year $ 5 EPS 100% Debt 100% Equity SON Debt 8 503 Equity e. Not available in Connect