Delsing Canning Company is considering an expansion of its facilities. Its current Income statement is as follows: Sales Variable costs (50% of sales) Fixed costs Earnings before interest and taxes (EBIT) Interest (186 cost) Earnings before taxes (EBT) Tax (48X) Earnings after taxes (EAT) Shares of common stock Earnings per share $5,see eee 2.750.ece 1.85e.eee $ 900.ece 300,eee bee.ece 249.888 $360.ee 250.ee 1.44 The company is currently financed with 50 percent debt and 50 percent equity (common stock, par value of $10). In order to expand the facilities, Mr. Delsing estimates a need for $2.5 million in additional financing. His Investment banker has laid out three plans for him to consider: 1. Sell $2.5 million of debt at 13 percent. 2. Sell $2.5 million of common stock at $20 per share. 3. Sell $1.25 million of debt at 12 percent and $1.25 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. Delsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1 million per year for the next five years. Delsing 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 your answers in dollars not in millions, Le. $1,234,567.) Break-Even Point Before expansion After expansion b. The degree of operating leverage before and after expansion Assume sales of $5.5 million before expansion and $6.5 million after expansion. Use the formula: DOL = (S-TV /S-TVC-FC). (Round your answers to 2 decimal places.) Degree of Operating Leverage Before expansion After expansion C-1. The degree of financial leverage before expansion (Round your answer to 2 decimal places.) Degree of financial leverage 1 C-2. The degree of financial leverage for all three methods after expansi
Delsing Canning Company is considering an expansion of its facilities
Delsing Canning Company is considering an expansion of its facilities. Its current Income statement is as follows: Sales Variable costs (50% of sales) Fixed costs Earnings before interest and taxes (EBIT) Interest (186 cost) Earnings before taxes (EBT) Tax (48X) Earnings after taxes (EAT) Shares of common stock Earnings per share $5,see eee 2.750.ece 1.85e.eee $ 900.ece 300,eee bee.ece 249.888 $360.ee 250.ee 1.44 The company is currently financed with 50 percent debt and 50 percent equity (common stock, par value of $10). In order to expand the facilities, Mr. Delsing estimates a need for $2.5 million in additional financing. His Investment banker has laid out three plans for him to consider: 1. Sell $2.5 million of debt at 13 percent. 2. Sell $2.5 million of common stock at $20 per share. 3. Sell $1.25 million of debt at 12 percent and $1.25 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. Delsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1 million per year for the next five years. Delsing 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 your answers in dollars not in millions, Le. $1,234,567.) Break-Even Point Before expansion After expansion b. The degree of operating leverage before and after expansion Assume sales of $5.5 million before expansion and $6.5 million after expansion. Use the formula: DOL = (S-TV /S-TVC-FC). (Round your answers to 2 decimal places.) Degree of Operating Leverage Before expansion After expansion C-1. The degree of financial leverage before expansion (Round your answer to 2 decimal places.) Degree of financial leverage 1 C-2. The degree of financial leverage for all three methods after expansi
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