Interest versus dividend expenseMichaels Corporation expects earnings before interest and taxes to be $30,000 for the current period. Assuming a flat ordinary tax rate of 30%,

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 $10,000 in interest.

b. The firm pays $10,000 in preferred stock dividends.