Because Some Countries Have a Lower Withholding Tax on Interest

question 61

Multiple Choice

Because some countries have a lower withholding tax on interest than they do for dividends,multinational corporations may finance foreign operations with debt rather than equity. What additional reason may a MNC have for using this investment strategy?

• A)Interest is generally a deductible expense,whereas dividends paid are not.
• B)Dividends require a cash outflow but interest does not.
• C)Cash flows from dividends must be discounted using the cost of capital,which is not the case for interest.
• D)all of the above

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