Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Question
Chapter 31, Problem 11P
a.
Summary Introduction
To determine: The U.S. tax liability on the earnings from the Polish subsidiary assuming that the Swedish subsidiary did not exist.
Introduction:
International tax and valuation: International tax refers to the tax levied on the cross-border transaction. It is the determination of tax on a business, firm, or person to the tax laws of different countries.
b.
Summary Introduction
To determine: The U.S. tax liability on the earnings from the Swedish subsidiary assuming that the Polish subsidiary did not exist.
c.
Summary Introduction
To determine: The total U.S. tax liability on foreign earnings.
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Midnight Motors is a US multinational firm. The manager of Midnight Motors is evaluating its international tax situation. In the US, Midnight Motors’ corporate tax rate is currently 26%. Midnight Motors has major operations in Argentina, Brazil, and China, and the tax rate is 13%, 41%, and 31%, respectively. Assume Midnight Motors' profits are fully and immediately repatriated. The foreign taxes paid for the current year are listed as follows:
Argentina
Brazil
China
Earnings before interest and taxes (EBIT) ($million)
$490
$560
$630
Host country taxes paid
$63.7
$229.6
$195.3
Earnings before interest after taxes
$426.3
$330.4
$434.7
Midnight Motors' net US tax liability on its foreign earnings is closest to:
$437 million
$-52 million
$0 million
$489 million
9. HiramCo, a U.S. entity, wholly owns corporations that operate manufacturing businesses in both Mexico and Costa Rica, and it holds its investment portfolio in Sweden. How many foreign tax credit computations must HiramCo make? Be specific, and use the term basket in your answer.
Brandy, a U.S. corporation, operates a manufacturing branch in Chad, which does not have an income tax treaty with the United States. Brandy’s world- wide Federal taxable income is $30,000,000; it is subject to a 21% marginal tax rate. Profits and taxes in Chad for the current year are summarized as follows. Compute Brandy’s foreign tax credit associated with its operations in Chad.
Chapter 31 Solutions
Corporate Finance
Ch. 31.1 - Prob. 1CCCh. 31.1 - What implication do internationally integrated...Ch. 31.2 - Prob. 1CCCh. 31.2 - When do these two methods give the same NPV of the...Ch. 31.3 - Prob. 1CCCh. 31.3 - Prob. 2CCCh. 31.4 - Prob. 1CCCh. 31.4 - Prob. 2CCCh. 31.5 - What conditions cause the cash flows of a foreign...Ch. 31.5 - Prob. 2CC
Ch. 31 - You are a U.S. investor who is trying to calculate...Ch. 31 - Prob. 2PCh. 31 - Etemadi Amalgamated, a U.S. manufacturing firm, is...Ch. 31 - Prob. 4PCh. 31 - You work for a U.S. firm, and your boss has asked...Ch. 31 - Prob. 6PCh. 31 - Prob. 7PCh. 31 - Prob. 8PCh. 31 - Prob. 9PCh. 31 - Prob. 10PCh. 31 - Prob. 11PCh. 31 - Prob. 12PCh. 31 - Prob. 13P
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