Interest versus dividend expenseMichaels Corporation expects earnings before interest and taxes to be $$50,000 for this period. Assuming an ordinary tax rate of 35%, 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 $ $12,000 in interest.

b. The firm pays $ $12,000 in preferred stock dividends.

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: _____

EARNINGS BEFORE TAX ___

LESS: TAX (35) ___

EARNINGS AFTER TAX ____

LESS: PREFERRED DIVIDENDS ______

EARNINGS AVAILABLE FOR COMMON STOCK HOLDERS ____

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