Cathy Takes Five Key Clients to Dinner and Incurs the Following

question 103

Essay

Cathy takes five key clients to dinner and incurs the following costs: $320 limousine rental, $920 drinks and dinner, and $200 tips; assume that there were substantive business discussions during dinner. Several days after the function, Cathy mails each client a pen costing $25. In addition, Cathy pays $4 for gift wrapping and mailing each pen. Assuming adequate substantiation and a business justification, what is Cathy's deduction?

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Definitions:

Absolute Purchasing Power Parity

A theory that suggests that in the absence of transaction costs and barriers to trade, identical goods should have the same price in different countries.

Forward Exchange Rate

The predetermined rate at which two currencies will be exchanged at a future date.

International Fisher Effect

The International Fisher Effect is a theory that suggests differences in nominal interest rates in different countries are directly proportional to changes in the exchange rate between their currencies.

Spot Exchange Rate

The current exchange rate at which one currency can be immediately exchanged for another currency.