TABLE 20.1
Uses the information to answer following question(s).
MetroCity Designs Inc., located in Northern California, has two international subsidiaries, one located in the Ukraine, the other in Korea. Consider the information below to answer the next several questions.
-Refer to Table 20.1. If MetroCity set the payout rate from the Ukraine subsidiary at 25%, how should MetroCity set the payout rate of the Korean subsidiary (approximately)to more efficiently manage its total foreign tax bill?
A)28.5%
B)24.5%
C)42.6%
D)82.3%

Question

TABLE 20.1
Uses the information to answer following question(s).
MetroCity Designs Inc., located in Northern California, has two international subsidiaries, one located in the Ukraine, the other in Korea. Consider the information below to answer the next several questions. 
-Refer to Table 20.1. If MetroCity set the payout rate from the Ukraine subsidiary at 25%, how should MetroCity set the payout rate of the Korean subsidiary (approximately)to more efficiently manage its total foreign tax bill?
A)28.5% 
B)24.5% 
C)42.6% 
D)82.3%

Quizplus · Accepted Answer

To effectively manage the foreign tax bill, the payout rate from the Korean subsidiary should be set to approximately the same rate as the Ukraine subsidiary. At a payout rate of 25% from Ukraine and a tax rate of 35%, the effective tax rate is 8.75%. From the table, a payout rate of approximately 24.5% from the Korean subsidiary would result in a similar effective tax rate of around 8.78%.

TABLE 20.1 Uses the Information to Answer Following Question(s)