Interest versus dividend expense Michaels Corporation expects earnings before interest and taxes to be $50,000 for the current period. Assuming an ordinary tax rate of 35%, compute the firm’s earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under the following conditions:

a. The firm pays $12,000 in interest.

b. The firm pays $12,000 in preferred stock dividends.