TABLE 15.1 Use the Information to Answer Following Question(s)

question 6

Multiple Choice

TABLE 15.1
Use the information to answer following question(s) .
BayArea 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 15.1. If BayArea set the payout rate from the Ukraine subsidiary at 25%, how should BayArea 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%

---

Definitions:

Cost of Equity

The return a company must offer investors to compensate for the risk of investing in its stock, usually estimated using models like the Capital Asset Pricing Model (CAPM).

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, and typically pays dividends before common stock.

Common Stock

Shares of ownership in a corporation that entitle the shareholder to vote at shareholder meetings and receive dividends.

Beta

An indicator of how much a stock's price fluctuates in comparison to the general market.