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the degree of operating leverage is correct but the other parts of part c i keep getting wrong! please help! DeSoto Tools Inc. is planning
the degree of operating leverage is correct but the other parts of part c i keep getting wrong! please help!
DeSoto Tools Inc. is planning to expand production. The expansion will cost $4,200,000, which can be financed either by bonds at an interest rate of 8 percent or by selling 84,000 shares of common stock at $50 per share. The current income statement before expansion is as follows DESOTO TOOLS INC. Income Statement 20X1 Sales Variable costs Fixed costs Earnings before interest and taxes $1,770,000 Interest expense Earnings before taxes Taxes @ 30% $3,240,000 648,000 822,000 620,000 $1,150,000 345,000 $ 805, 000 320,000 2.52 Earnings after taxes Shares Earnings per share After the expansion, sales are expected to increase by $1,720,000. Variable costs will remain at 20 percent of sales, and fixed costs will increase to $1,394,000. The tax rate is 30 percentStep by Step Solution
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