Corporation A and Corporation B are both expected to enjoyearnings before interest and taxes of 100.000$.Corporation A will alsoincur 40.000$ in inteterst expenses as aresult of borrowing.While corporation B will have no inteterst expense as it does financing.Instead Corp B will pay Shareholders 40.000$ in divident income,both companiesare in a%40 tax bracket

1-.What are the earnings after tax for each firm

2-Which company has the higher after taxearning?

3-which firm appears to have the higher cash flow?

4-How do you account for the diffrence ?