Help Save & E Phelps Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales Less: Variable expense (50% of sales) Fixed expense $6,400,000 3,200,000 1,940,000 Earnings before interest and taxes (EBIT) Interest (10% cost) 1,260,000 480,000 45:33 Earnings before taxes (EBT) Tax (40%) 780,000 312,000 Earnings after taxes (EAT) $468,000 ok Shares of common stock EPS 340,000 $1.38 nt ences 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 $3.4 million in additional financing. His investment dealer has laid out three plans for him to consider. 1. Sell $3.4 million of debt at 10 percent. 2. Sell $3.4 million of common stock at $20 per share. 3. Sell $1.70 million of debt at 9 percent and $1.70 million of common stock at $25 per share. Help Save & Exit Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,440,000 per year. Mr. Phelps is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1.70 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.) 0 Before expansion After expansion Break-even point $ $ b. The DOL before and after expansion. Assume sales of $6.4 million before expansion and $7.4 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 $6.4 million. (Round the final answers to 2 decimal places.) DFL X c-2. The DFL for all three methods after expansion. Assume sales of $7.4 million. (Round the final answers to 2 decimal places.) Prey. 1 of 4 Next > Help Save & Exit Before expansion After expansion X c-1. The DFL before expansion at sales of $6.4 million. (Round the final answers to 2 decimal places.) DFL X C-2. The DFL for all three methods after expansion. Assume sales of $7.4 million. (Round the final answers to 2 decimal places.) DFL 2:45:04 100% Debt 100% Equity 50% Debt & 50% Equity X Book Print d. Compute EPS under all three methods of financing the expansion at $7.4 million in sales (first year) and $10.3 million in sales (last year). (Round the final answers to 2 decimal places.) erences First year $ Last year $ EPS 100% Debt 100% Equity 50% Debt & 50% Equity e. Not available in Connect