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To calculate the earnings after taxes for Ag Silver Mining, Inc., we need to subtract the taxes from the earnings before interest and taxes (EBIT).
1. Calculate the taxable income:
Taxable income = EBIT - Interest expense
Taxable income = $500,000 - $10,000
Taxable income = $490,000
2. Calculate the taxes on ordinary income:
Taxes on ordinary income = Taxable income * tax rate
Taxes on ordinary income = $490,000 * 40%
Taxes on ordinary income = $196,000
3. Calculate the earnings after taxes:
Earnings after taxes = EBIT - Taxes on ordinary income - Dividends
Earnings after taxes = $500,000 - $196,000 - $100,000
Earnings after taxes = $204,000
Therefore, the earnings after taxes for Ag Silver Mining, Inc. is $204,000.