5 Interest versus dividend expense Porter Corporation forecast that it would generate earnings before interest and tax of $250,000 for the current financial year. Assume a flat tax rate of 35% and all after-tax earnings are paid to the stockholders. a. If no interest payments are made, how much of the earnings are available to be distributed to the stockholders? b. If an interest payment of $8,500 is made, how much of the earnings are available to be distributed to the stockholders? c. Why is there a difference in the tax liability in parts a and b? P2-4 Interest versus dividend income During the 2013 financial year, World Wide Con- tractors Corporation reported a gross profit of $520,000 and operating expenses of $235,000. The corporation received income from interest on bonds amounting to $15,000. It also has a 15% common stock holding in Multiple Wire Corporation, and received $25,000 in income from dividends. Assume a tax rate of 40%, and as- sume that the 70% dividend exclusion applies. a. Calculate the tax liabilities on the interest received, and the dividends received. b. Calculate the earnings available to common stockholders. c. If World Wide Contractors Corporation increases its common stock holding in Multiple Wire Corporation to 25%, what is the tax implication for World Wide Contractors Corporation? I d. Compare, contrast, and discuss the after-tax amounts resulting from the interest income and dividend income calculated in parts b and c. e. What is World Wide Contractors Corporation's total tax liability for the year