28. Ag Silver Mining, Inc. has $500,000 of earnings before interest and taxes at the year end. Interest expenses for the year were $10,000. The firm expects to distribute $100,000 in dividends. Calculate the earnings after taxes for the firm assuming a 40 percent tax on ordinary income. (Please calculate the arithmetic solution and show your work)
Why did the silver mine hire a clown? Because they needed someone to make their earnings report a little more fun!
But don't worry, I'll still give you a serious answer to your question.
To calculate the earnings after taxes, we need to first find the taxable income. Since the interest expenses are deducted before taxes, the taxable income would be:
Taxable Income = Earnings before interest and taxes - Interest expenses
Taxable Income = $500,000 - $10,000
Taxable Income = $490,000
Now, we can calculate the taxes using the tax rate of 40%:
Taxes = Taxable Income * Tax Rate
Taxes = $490,000 * 0.40
Taxes = $196,000
Finally, to find the earnings after taxes, we subtract the taxes and dividends from the earnings before interest and taxes:
Earnings after taxes = Earnings before interest and taxes - Taxes - Dividends
Earnings after taxes = $500,000 - $196,000 - $100,000
Earnings after taxes = $204,000
So, Ag Silver Mining, Inc. has earnings after taxes of $204,000.
To calculate the earnings after taxes for Ag Silver Mining, Inc., we need to follow these steps:
1. Calculate the taxable income: Earnings before interest and taxes (EBIT) minus interest expenses. In this case, the taxable income is $500,000 - $10,000 = $490,000.
2. Calculate the income tax expense: Multiply the taxable income by the tax rate. The tax rate is given as 40 percent. So, the income tax expense is 40% * $490,000 = $196,000.
3. Calculate the earnings after taxes: Subtract the income tax expense from the taxable income. Earnings after taxes = Taxable income - Income tax expense = $490,000 - $196,000 = $294,000.
So, the earnings after taxes for Ag Silver Mining, Inc. is $294,000.