Learning Goal 1
E19–1 Santana Music is a U.S.-based MNC whose foreign subsidiary had pretax income of $55,000; all after-tax income is available in the form of dividends to the parent company. The local tax rate is 40%, the foreign dividend withholding tax rate is 5%, and the U.S. tax rate is 34%. Compare the net funds available to the parent corporation (a) if foreign taxes can be applied against the U.S. tax liability and (b) if they cannot.
Learning Goal 3
E19–2 Assume that the Mexican peso currently trades at 12 pesos to the U.S. dollar. During the year, U.S. inflation is expected to average 3%, while Mexican inflation is expected to average 5%. What is the current value of one ...