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:
Step 1: Calculate the earnings before taxes (EBT).
EBT = Earnings before Interest and Taxes - Interest Expenses
EBT = $500,000 - $10,000
EBT = $490,000
Step 2: Calculate the taxes on ordinary income.
Tax on ordinary income = 40% of EBT
Tax on ordinary income = 40% * $490,000
Tax on ordinary income = $196,000
Step 3: Calculate the earnings after taxes.
Earnings after taxes = EBT - Taxes on ordinary income
Earnings after taxes = $490,000 - $196,000
Earnings after taxes = $294,000
Therefore, the earnings after taxes for Ag Silver Mining, Inc. is $294,000.