Michaels Corporation expects earnings before interest and taxes to be $40,000 for the current period. Assuming an

Question:

Michaels expects earnings before interest and taxes to be $40,000 for the current period. Assuming an ordinary tax rate of 40%, 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.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...