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2. Michaels Corporation expects earnings before interest andtaxes to be $50,000 for this period. Assuming an ordinary tax rate of 40 percent, compute the firm's
2. Michaels Corporation expects earnings before interest andtaxes to be $50,000 for this period. Assuming an ordinary tax rate of 40 percent, 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 $12,900 in interest. b. The firm pays $12,900 in preferred stock dividends.
| Earnings Before Interest and tax | 50,000 |
| Less: Interest | 12,900 |
| Earnings before tax | 37100 |
| Less: Tax (40%) | 14840 |
| Earnings after taxes | 22,260 |
| Less: Preferred Dividends | ? |
| Net Earnings available of Common Stockholders | 22260 |
b. The firm pays $12,900 in preferred stock dividends.
| Earnings Before Interest and tax | ? |
| Less: Interest | ? |
| Earnings before tax | ? |
| Less: Tax | ? |
| Net Earnings | ? |
| Less: Preferred Stock Dividends | ? |
| Net Earnings available of Common Stockholders | ? |
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