What Has Spawned a Major Political Issue Concerning the Estimated

question 23

Multiple Choice

What has spawned a major political issue concerning the estimated cost to the United States Treasury of as much as $9 billion to $13 billion per year in lost taxes that could presumably be collected if transfer prices were calculated according to U.S.tax laws?

• A)Tax avoidance by foreign companies using inflated transfer prices to reduce the profit of U.S.subsidiaries.
• B)Tax avoidance by domestic,United States,companies using inflated transfer prices to reduce the foreign profit of U.S.subsidiaries.
• C)Tax avoidance by foreign companies using deflated transfer prices to reduce the profit of U.S.subsidiaries.
• D)Tax avoidance by domestic,United States,companies using deflated transfer prices to reduce the profit of foreign subsidiaries.

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Definitions:

Discounted Payback

A capital budgeting method that calculates the time required to break even on an investment, considering the present value of future cash flows.

Payback

The period of time required to recover the cost of an investment.

Liquidity

The simplicity of transforming an asset or security into immediate cash without impacting its market value.

Internal Rate of Return

The discount rate that makes the net present value (NPV) of all cash flows (both positive and negative) from a particular project or investment equal to zero.