Interest versus dividend expense

Michaels Corporation expects earnings before interest and taxes to be for the current period. Assuming a flat ordinary tax rate of , 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 in interest.

b. The firm pays in preferred stock dividends.

a. Complete the fragment of Michaels Corporation's income statement below to compute the firm's earnings after taxes and earnings available for common stockholders under condition (a).(Round to the nearest dollar.)

EBIT $

Less: Interest expense

Earnings before taxes $

Less: Taxes (27%)

Earnings after taxes $

Less: Preferred dividends

Earnings available for common stockholders $