Luther Industries,a U

question 24

Essay

Luther Industries,a U.S.firm.has a subsidiary in the United Kingdom.This year,the subsidiary reported and repatriated earnings before interest and taxes (EBIT)of £45 million.The current exchange rate is $1.86/£.The tax rate in the U.K.for this activity is 28%.Under U.S.tax codes,Luther is facing a 35% corporate tax rate on their earnings.What is Luther's U.S.tax liability on its U.K.subsidiary?

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Definitions:

Duopoly

A market structure where two companies hold dominant or exclusive control over a particular industry or market segment.

Nash Equilibriums

An idea in game theory where a player cannot gain an advantage by altering their strategy if all other players maintain theirs.

Repeated Games

Games in which players engage in a sequence of rounds, allowing for strategy development based on previous outcomes.

Reciprocity

A practice or agreement where two parties provide each other with mutual benefits, often used in trade agreements and social interactions.