Which of the Following Statements Regarding the Tax Climate Prior

question 25

Multiple Choice

Which of the following statements regarding the tax climate prior to the TCJA of 2017 is FALSE?

• A)The United States taxed the worldwide earnings of U.S.companies at the same rate as profits earned in the United States.
• B)U.S.tax policy allowed companies to apply the part of the tax credit that was not used to offset domestic taxes owed,so this extra tax credit was not wasted.
• C)If the foreign tax rate was less than the U.S.tax rate,the company paid additional taxes equal to difference between the U.S.tax rate and the foreign tax paid on its foreign earnings.
• D)A full tax credit was given for foreign taxes paid up to the amount of the U.S.tax liability.

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Definitions:

Risk Averse

The tendency to prefer certainty over risk, where an individual opts for the investment with the least potential for financial loss.

NPV

A financial metric that calculates the total value of a project or investment by discounting future cash flows back to their present value and subtracting initial investment cost.

Scenario Analysis

A business planning technique in which the implications of variations in planning assumptions are explored. Also known as “what-if-ing.”

Abandonment Option

A financial decision allowing companies to cease a project or investment to avoid further losses.