Question
1. Interest versus Dividend Expense Longview Products Company (LPC) expects earnings before interest and taxes of $500,000 for this year. Under the new tax law,
1. Interest versus Dividend Expense
Longview Products Company (LPC) expects earnings before interest and taxes of $500,000 for
this year. Under the new tax law, LPC is subject to a 21% flat tax. 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 scenarios:
a. LPC pays $80,000 in interest expense.
b. LPC pays $80,000 in preferred stock dividends
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Fundamentals Of Financial Management
Authors: James Van Horne, John Wachowicz
13th Revised Edition
978-0273713630, 273713639
