Tax Arbitrage

question 1

Multiple Choice

Tax arbitrage

• A)arises when subsidiary profits vary due to local regulations
• B)occurs when firms move funds to lower tax jurisdictions
• C)arises when barriers to trade exist
• D)occurs due to the incidence of capital flight

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Definitions:

Growing Annuity

A series of periodic payments that grow at a constant rate for a specific number of periods.

Cash Flow Growth

An increase in the amount of money moving in and out of a business over a specific period, indicative of its financial health and operational efficiency.

Loan Principle

The original sum of money borrowed in a loan agreement, which does not include interest or other charges.

Interest Rate

The fraction of a quantity of money that is required as payment for lending it, often stated on a yearly basis.