FINANCE-$250,000 Before local taxes 33% Foreign tax rate 9% Foreign dividend witholding 34% U.S tax rate

LG 1

$250,000

Before local taxes

33%

Foreign tax rate

Foreign dividend witholding

34%

U.S tax rate

$250,000

Before local taxes

$82,500

Foreign tax rate

$167,500

Dividend declared

$15,075

Foreign dividend witholding

$152,425

MNC’s receipt of dividends

$250,000

MNC income

$85,000

U.S tax rate

$97,575

Total foreign tax paid

U.S. tax due

$152,425

Net funds available

$250,000

Before local taxes

$82,500

Foreign tax rate

$167,500

Dividend declared

$15,075

Foreign dividend witholding

$152,425

MNC’s receipt of dividends

$51,825

U.S. tax liabilities

$100,601

LG 3

$3,688

Cost of trip (2,750x$1.3411)

$1,490

Round trip

$300

Travel expenses

$671

Meals (500x$1.3411)

$1,000

Miscellaneous

$7,149

Total

500.0

Meals

745.6

Miscellaneous ($1,000×0.7456)

1245.6

Total (euros)

LG 5

Item

Spot exchange rates

MP 11.60/US$

108.25/US$

Forecast % change

3.00%

1.50%

Interest rates

Nominal

Euromarket

4.00%

6.20%

2.00%

Domestic

3.75%

5.90%

2.15%

Effective

Euromarket

4.00%

3.20%

3.50%

Domestic

3.75%

2.90%

3.65%

For
investing the highest available effective rate of interest is 4.00% in the
US$ Euromarket. The Mexico subsidiary should invest the $80 million in
Mexican Peso in U.S. dollars. To raise funds the cheapest source open to the
Japanese subsidiary is the 3.0% effective rate for the Mexican Peso in the
Euromarket. The subsidiary should raise the $60 million in Mexican Peso in
the Euromarket.

FINANCE-$250,000 Before local taxes 33% Foreign tax rate 9% Foreign dividend witholding 34% U.S tax rate

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