# FIN-450 Week 8 Chapter 19 Practice Problems - P19-1, P19-3, & P19-5

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FIN-450 Week 8 Chapter 19 Practice Problems - P19-1, P19-3, & P19-5

Intermediate Finance - Special Topics in Financial Management

Grand Canyon University

Complete the following problems from Chapter 19 in the textbook:

1. P19-1

2. P19-3

3. P19-5

P19–1 Tax credits A U.S.-based MNC has a foreign subsidiary that earns \$250,000 before local taxes, with all the after-tax funds to be available to the parent in the form of dividends. The applicable taxes consist of a 33% foreign income tax rate, a foreign dividend withholding tax rate of 9%, and a U.S. tax rate of 34%. Calculate the net funds available to the parent MNC if:

a. Foreign taxes can be applied as a credit against the MNC’s U.S. tax liability.

b. No tax credits are allowed.

P19–3 Exchange rates Fred Nappa is planning to take a wine-tasting tour through Italy this summer. The tour will cost 2,750 euros (€) and includes transportation, hotels, and a guide. Fred estimates that round-trip airfare from his home in North Carolina to Rome, Italy, will be \$1,490; he also will incur another \$300 (U.S.) in incidental travel expenses. Fred estimates the cost of meals in Italy to be about €500, and he will take an additional \$1,000 to cover miscellaneous expenditures. Currently, the exchange rate is US\$1.3411/€1.00 (or €.7456/US\$1.00).

a. Determine the total dollar cost of the trip to Italy.

b. Determine the amount of euros (€) Fred will need to cover meals and miscellaneous expenditures.

P19–5 Euromarket investment and fund raising A U.S.-based multinational company has two subsidiaries, one in Mexico (local currency, Mexican peso, MP) and one in Japan (local currency, yen, ¥). Forecasts of business operations indicate the following short-term financing position for each subsidiary (in equivalent U.S. dollars): Mexico: \$80 million excess cash to be invested (lent). The management gathered the following data:…………………………………..

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