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Tax-haven subsidiaries are typically established in a country that can meet the following requirements_____________.

A. a stable government that encourages the establishment of foreign-owned financial and service facilities within its borders
B. the facilities to support financial services, for example, good communications, professional qualified office workers, and reputable banking services
C. a low tax on foreign investment or sales income earned by resident corporations and a low dividend withholding tax on dividends paid to the parent firm.
D. all of the above

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Bacon Signs Inc. is based in a country with a territorial approach to taxation but generates 100% of its income in a country with a worldwide approach to taxation. The tax rate in the country of incorporation is 25%, and the tax rate in the country where they earn their income is 50%. In theory, and without any special provisions in the tax laws of either country, Bacon should pay taxes at a rate of_______________.

A. 62.5%
B. 0%
C. 50%
D. 75%

Real option analysis allows managers to analyze all of the following EXCEPT______.

A. the option to defer
B. the option to abandon
C. the option to alter capacity
D. All of the above may be analyzed using real option analysis

The United States taxes the domestic and remitted foreign earnings of U.S. based MNEs no matter where the earnings occurred. This is an example of a/an ________ approach to levying taxes.

A. worldwide
B. equitable
C. neutral
D. territorial

In theory, the purely domestic firm should support _________ debt ratios than a MNE because their cash flows are _______________.

A. higher; more stable due to a lack of international diversification
B. higher; less stable due to a lack of international diversification
C. lower; more stable due to a lack of international diversification
D. lower; less stable due to a lack of international diversification

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