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In 2011 Beta Corporation earned gross profits of $760,000. a. Suppose that it is financed by a combination of common stock and $1 million of

In 2011 Beta Corporation earned gross profits of $760,000.

a.

Suppose that it is financed by a combination of common stock and $1 million of debt. The interest rate on the debt is 10%, and the corporate tax rate is 35%. How much profit is available for common stockholders after payment of interest and corporate taxes? (Enter your answer in nearest dollars not in millions.)

Profit $

b.

Now suppose that instead of issuing debt Beta is financed by a combination of common stock and $1 million of preferred stock. The dividend yield on the preferred is 8% and the corporate tax rate is still 35%. How much profit is now available for common stockholders after payment of preferred dividends and corporate taxes? (Enter your answer in nearest dollars not in millions.)

Profit $

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