Phelps Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales Less: Variable expense (ses of sales) Fixed expense $5,500,000 2,750,000 1,850,000 Earnings before interest and taxes (EBIT) Interest (101 cost) 900,000 300,000 Earnings before taxes (EBT) Tax (404) 600,000 240,000 Earnings after taxes (EAT) $360,000 Shares of common stock EPS 250,000 $1.44 Phelps Canning Company is currently financed with 50 percent debt and 50 percent equity (common stock). To expand facilities, Mt. Phelps estimates a need for $2.5 million in additional financing. His Investment dealer hos fold out three plans for him to consider 1. Sell $2.5 million of debtot 13 percent 2. Sell $2.5 million of common stock at $20 per share. 3. Sell $1.25 million of debtot 12 percent and S1.25 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 $2,350,000 per year, Mr. Phelps is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1.25 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 Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,350,000 per year. Mr. Phelps is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1.25 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 $5.5 million before expansion and $6,5 million after expansion (Round the final answers to 2 decimal places.) DOL Before expansion After expansion c-1. The DFL before expansion at sales of $5.5 million (Round the final answers to 2 decimal places.) DFL c-2. The DFL for all three methods after expansion. Assume sales of $6.5 million (Round the final answers to 2 decimal places.) DFL D. I ne VUL Derore and arter expansion. Assume sales of $5.5 million Derore expansion ana 30. minion after expansion. (nouna te final answers to 2 decimal places.) DOL Before expansion After expansion X 61. The DFL before expansion at sales of $5.5 million (Round the final answers to 2 decimal places.) DFL X c-2. The OFL. for all three methods after expansion. Assume sales of $6.5 million, (Round the final answers to 2 decimal places, DFL 100 Debt 100 Equity sos Debt & 50Equity d. Compute EPS under all three methods of financing the expansion at $6.5 million in sales (irst year) and $10,5 million in sales (last year). (Round the final answers to 2 decimal places.) First year Last year EPS 100 Debt 1001 Equity Sos Debt 6 509 Equity e. Not available in Connect