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)
To calculate the earnings after taxes for Ag Silver Mining, Inc., we need to follow these steps:
1. Calculate the taxable income:
Taxable Income = Earnings Before Interest and Taxes (EBIT) - Interest Expenses
Taxable Income = $500,000 - $10,000
Taxable Income = $490,000
2. Apply the tax rate:
Tax = Taxable Income × Tax Rate
Tax = $490,000 × 0.40
Tax = $196,000
3. Calculate the earnings after taxes:
Earnings After Taxes = Taxable Income - Tax
Earnings After Taxes = $490,000 - $196,000
Earnings After Taxes = $294,000
Therefore, the earnings after taxes for Ag Silver Mining, Inc. will be $294,000.