Question
Interest versus dividend expenseMichaels Corporation expects earnings before interest and taxes to be $53,000 for this period. Assuming an ordinary tax rate of 35%, compute
Interest versus dividend expenseMichaels Corporation expects earnings before interest and taxes to be $53,000 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 $11,000 in interest; 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.
b. The firm pays $11,000 in preferred stock dividends.
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