TABLE 14.1
Uses the information to answer the 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 14.1. 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 14.1
Uses the information to answer the 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 14.1. 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 minimize foreign tax bill, MetroCity should set the payout rate of the Korean subsidiary at the same rate as the tax rate in Ukraine. Since the tax rate in Ukraine is 30% and MetroCity wants to set the payout rate at 25%, the Korean subsidiary should have a payout rate slightly lower than 30%, which is approximately 24.5%.

TABLE 14.1 Uses the Information to Answer the Following Question(s)