Need help in calculating question "A"

preparing a proposal to present to
board of directors regarding a planned plant expansion that will cost $10 million.
At issue is whether the expansion should be financed with debt (a long-term note at First
National Bank of Uvalde with an interest rate of 15%) or through the issuance of common
stock (200,000 shares at $50 per share).

Uvalde Manufacturing currently has a capital structure of:
Debt (12% interest) 40,000,000
Equity 50,000,000

The firm’s most recent income statement is presented next:
Sales $100,000,000
Cost of goods sold 65,000,000
Gross profit 35,000,000
Operating expenses 20,000,000
Operating profit 15,000,000
Interest expense 4,800,000
Earnings before tax 10,200,000
Income tax expense (40%) 4,080,000
Net income $ 6,120,000
Earnings per share(800,000 shares) $ 7.65

Laurel Street is aware that financing the expansion with debt will increase risk but could
also benefit shareholders through financial leverage. Estimates are that the plant expansion
will increase operating profit by 20%.The tax rate is expected to stay at 40%.Assume
a 100% dividend payout ratio.

A. calculate the debt ratio, time interest earned, earnings per share, adn the financial leverage index under each alternative, assuming he expected increase in operating profit is realized.

Do what most corporate managers do these days...Assume the debt if anyone is foolish enough to lend to you, be a hero and make things look good to the shareholders in the short term. Always remember the long term is someone else's problem and bailout with as much cash as you can grab while everyone thinks you're still wonderful. You can build a career and huge golden parachute with this technique. While it might tank the company or the entire economy, it won't hurt your wallet. Privitize profit and socialize risk, it's the American Way.

Oh, and don't forget to write a book on 'leadership' for us poor working stiffs.