A Subsidiary Is Most Likely to Receive Favorable Treatment from an MNE

question 49

Multiple Choice

A subsidiary is most likely to receive favorable treatment from an MNE if it is located in a country with ________.

• A) lower corporate income-tax rates
• B) significant restrictions on profit repatriation
• C) low tariffs for the product in question
• D) political instability

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Definitions:

Present Value

The present monetary value of a future sum or a series of cash payments, considering a designated rate of return.

Actuarial Information

Actuarial information involves data and analysis related to assessing financial risks in insurance and finance, especially calculations concerning premiums or pension obligations.

Interest Expense

The cost incurred by an entity for borrowed funds, which is charged as an expense on the income statement over the period the funds are borrowed.

Effective Interest Method

An accounting practice used to allocate interest expense or income over the life of a financial instrument at a constant interest rate.