A US based company that buys components from one of its foreign subsidiaries at a price above market is likely to Group of answer choices shifting from a high tax country to a low tax country need tax consultants to be intermediaries get large dividends by the subsidiary ask for the money back

A US based company that buys components from one of its foreign subsidiaries at a price above market is likely to Group of answer choices shifting from a high tax country to a low tax country need tax consultants to be intermediaries get large dividends by the subsidiary ask for the money back

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter12: Managing Economic Exposure And Translation Exposure

Section: Chapter Questions

Problem 4ST

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Question What does International transfer pricing generally entail ? Select an answer: ( A ) the premium (ar tax) charged when products are moved across international borders ( B ) factoring in the various tax rates of the jurisdictions from where a product is coming from and where it is going to ( C ) a corporation selling products a different prices in different countries ( D ) a corporation selling products from one division of the corporation to another division of the corporation located in a different country
Global Giant, a multinational corporation, has a producing subsidiary in a low-tax rate country and a marketing subsidiary in a high-tax country. If Global Giant wants to minimize its worldwide tax liability, we would expect Global Giant to ________. A. stop producing in the low tax rate country B. stop marketing in the high tax rate country C. establish a low transfer price when the producing unit sells to the marketing unit D. establish a high transfer price when the producing unit sells to the marketing unit
Give typing answer with explanation and conclusion Which of the following is an example of foreign exchange risk for an MNC? a. Foreign subsidiary of the MNC may face higher tarriffs b. Foreign subsidiary of the MNC may have to pay higher taxes c. Foreign subsidiary of the MNC may make less sales due to weak foreign currency d. Foreign subsidiary of the MNC may make less sales due to lower consumer income
56. Jensen Co. wants to establish a new subsidiary in Mexico that will sell computers to Mexican customers and remit earnings back to the U.S. parent. The value of this project will be favorably affected if the value of the peso ____ while it establishes the new subsidiary and ____ when the subsidiary starts operations. A. depreciates; appreciates B. appreciates; appreciates C. appreciates; depreciates D. depreciates; depreciates
If a U.S. firm has much more revenue than expenses denominated in euros, the firm will likely ____ if the euro ____. Group of answer choices benefit; weakens be unaffected; weakens be unaffected; strengthens benefit; strengthens
Following an unanticipated dollar appreciation, would you recommend that a domestic manufacturing company such as Cummins Engine sell foreign assets? Yes or No
Due to their rapid expansion to foreign markets the process is sometimes referred to as the “McDonaldization” of new markets. Which market entry strategy is McDonald’s Corporation using in those countries where local governments do not allow 100% foreign funded enterprises? a.Franchising b.Partnerships with local (domestic) companies c.Mergers & acquisitions d.Local holdings e.Direct export
Consider a US-based MNC with a wholly owned Italian subsidiary. Following a depreciation of the dollar against the euro, which of the following conclusions are correct? Group of answer choices a. The cash flow in euros could be altered due a change in the firm's competitive position in the marketplace. b. A given operating cash flow in euros will be converted to a higher US dollar cash flow. c. Both A and B d. None of the above
Which of the following is matter if a U.S. parent firm plans to completely finance the establishment of its British subsidiary with existing funds from retained earnings. The discount rate of the NPV from the project would be affected by ______. A. the parent's cost of capital B. the sales volume of the subsidiary C. the economic conditions D. the cost of borrowing
Which is the most simple way that is able to protect a U.S firm's earnings of its consolidated income statement in the depreciation of euro relative to U.S. dollar? A. Selling euros forward in the foreign exchange market. B. Partner with the local firm of the oversea market. C. Purchasing euros forward in the foreign exchange market. D. Establish a subsidiary in the oversea economy.
A firm can use transfer pricing to lower its income tax payments by reporting more income in high-tax-rate countries and less income in low-tax-rate countries. However, the tax regulations of different countries restrict the transfer prices that companies can use. True False: A firm can use transfer pricing to lower its income tax payments by reporting more income in low-tax-rate countries and less income in high-tax-rate countries. False: The tax regulations of different countries do not restrict the transfer prices that companies can use. both B and C none of the above
The foreign subsidiary of a U.S. firm is profitable when profits are measured in the foreign currency but those profits become losses when measured in U.S. dollars. This is an example of which one of the following? A. Interest rate disparities B. Short-run exposure to exchange rate risk C. Long-run exposure to exchange rate risk D. Political risk associated with the foreign operations E. Translation exposure to exchange rate risk