Assuming that the inter-affiliate cash flows are uncorrelated with one another,calculate the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members: (Round your final answer to nearest whole dollar) \[\begin{array} { l c c } \text { Affiliate } & \begin{array} { c } \text { Expected } \\ \text { Transactions } \end{array} & \begin{array} { c } \text { Standard } \\ \text { Deviation } \end{array} \\ \hline \text { U.S. } & \$ 100,000 & \$ 40,000 \\ \text { Canada } & \$ 150,000 & \$ 60,000 \\ \text { Mexico } & \$ 175,000 & \$ 30,000 \\ \text { Chile } & \$ 200,000 & \$ 70,000 \end{array}\]

A) 60,000 B) 88,122 C) 104,881 D) 120,103 A) 60,000 B) 88,122 C) 104,881 D) 120,103

The following information is available for Company ABC. (All amounts provided are in US dollars) $\begin{array}{lll} &\text { Manufacturing Affiliate } & \text { Sales Affiliate } \\ &\text { (Canada, income tax rate: } & \text { (United States, income } \\ &40 \% \text { ) } & \text { tax rate: } 30 \% \text { ) }\\ \text { Sales } & \_\_\_& \$ 10,000 \\ \text { Cost of goods sold } & 5,000 &\_\_\_ \\ \text { Operating expenses } & 1,000 & \$ 1,000\\ \text { Taxable income}\\ \text { Income taxes}\\ \text {Net income }\\ \end{array}$ -If the transfer price is $8,000,what is the income tax paid in the United States?

A) $300. B) $400. C) $700. D) $1,000. A) $300. B) $400. C) $700. D) $1,000.

The following information is available for Company ABC. (All amounts provided are in US dollars) $\begin{array}{lll} &\text { Manufacturing Affiliate } & \text { Sales Affiliate } \\ &\text { (Canada, income tax rate: } & \text { (United States, income } \\ &40 \% \text { ) } & \text { tax rate: } 30 \% \text { ) }\\ \text { Sales } & \_\_\_& \$ 10,000 \\ \text { Cost of goods sold } & 5,000 &\_\_\_ \\ \text { Operating expenses } & 1,000 & \$ 1,000\\ \text { Taxable income}\\ \text { Income taxes}\\ \text {Net income }\\ \end{array}$ -The United States decides to block funds leaving the country.What is the optimum transfer price?

A) $6,000. B) $7,000. C) $9,000. D) $10,000. A) $6,000. B) $7,000. C) $9,000. D) $10,000.

The following information is available for Company ABC. (All amounts provided are in US dollars) $\begin{array}{lll} &\text { Manufacturing Affiliate } & \text { Sales Affiliate } \\ &\text { (Canada, income tax rate: } & \text { (United States, income } \\ &40 \% \text { ) } & \text { tax rate: } 30 \% \text { ) }\\ \text { Sales } & \_\_\_& \$ 10,000 \\ \text { Cost of goods sold } & 5,000 &\_\_\_ \\ \text { Operating expenses } & 1,000 & \$ 1,000\\ \text { Taxable income}\\ \text { Income taxes}\\ \text {Net income }\\ \end{array}$ -If the transfer price is $8,000,what is the net income in Canada?

A) $800 B) $1,200 C) $2,000 D) $2,400 A) $800 B) $1,200 C) $2,000 D) $2,400

The following information is available for Company ABC. (All amounts provided are in US dollars) $\begin{array}{lll} &\text { Manufacturing Affiliate } & \text { Sales Affiliate } \\ &\text { (Canada, income tax rate: } & \text { (United States, income } \\ &40 \% \text { ) } & \text { tax rate: } 30 \% \text { ) }\\ \text { Sales } & \_\_\_& \$ 10,000 \\ \text { Cost of goods sold } & 5,000 &\_\_\_ \\ \text { Operating expenses } & 1,000 & \$ 1,000\\ \text { Taxable income}\\ \text { Income taxes}\\ \text {Net income }\\ \end{array}$ -Assume that the US and Canadian governments impose no restrictions on transfer pricing.What transfer price should Company ABC charge?

A) $5,000. B) $6,000. C) $7,000. D) $10,000. A) $5,000. B) $6,000. C) $7,000. D) $10,000.

Exam 18: Multinational Cash Management

Soleil Inc.has an affiliate in France and one in Singapore.The entire production of the French affiliate is sold to the affiliate in Singapore which sells the final product to customers.The Singaporean affiliate has sales of 300 and overhead costs of 20.The cost of goods sold in France is 150.The income tax rates are 40 percent in France and 20 percent in Singapore.Assume that neither Singapore nor France put any restrictions on the transfer price.What is the optimal transfer price? What are the total taxes paid?

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(Essay)

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Question 1

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$\begin{array}{lll} &\text {FRANCE }&\text {Singapore }&\\\text { Sales } & \mathbf{1 5 0} & 300 \\\text { Cost of goods sold } & 150 & \mathbf{- 1 5 0} \\\text { Overhead } & - & -20 \\\text { Taxable income } & 0 & 130 \\\text { Income taxes } & 0 & -26 \\\text { Net income } & 0 & 104\end{array}$ The optimal transfer price is 150 and the income taxes paid are 26.

Assume that Y pays a tax deductible tariff of 7 percent on imported merchandise.Calculate the increase in annual after-tax profits if the higher transfer price of $1,250 per unit is used. (Round intermediate values to nearest whole percentage.)

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(Multiple Choice)

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Question 2

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C

Unexpected Funds blockage is a:

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(Multiple Choice)

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Question 3

Correct Answer:

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D

When a country enforces exchange controls the profits of a subsidiary in that country are referred to as:

(Multiple Choice)

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Question 4

Assuming that the inter-affiliate cash flows are uncorrelated with one another,calculate the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members: (Round your final answer to nearest whole dollar) Affiliate Expected Transactions Standard Deviation U.S. \ 100,000 \ 40,000 Canada \ 150,000 \ 60,000 Mexico \ 175,000 \ 30,000 Chile \ 200,000 \ 70,000

(Multiple Choice)

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Question 5

The prices at which goods are sold by one division to another are called:

(Multiple Choice)

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Question 6

If inter-affiliate cash flows are uncorrelated with one another,what is the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members:

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Question 7

Using the national airlines of the host country that has enforced exchange rate controls is an example of:

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Question 8

Which of the following is not a basic method used by the internal revenue service (IRS)to establish an arm's-length price for tangible goods?

(Multiple Choice)

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Question 9

Efficient cash management techniques can:

(Multiple Choice)

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Question 10

The following information is available for Company ABC. (All amounts provided are in US dollars) Manufacturing Affiliate Sales Affiliate (Canada, income tax rate: (United States, income 40\% ) tax rate: 30\% ) Sales \_\_\_ \ 10,000 Cost of goods sold 5,000 \_\_\_ Operating expenses 1,000 \ 1,000 Taxable income Income taxes Net income -If the transfer price is $8,000,what is the income tax paid in the United States?

(Multiple Choice)

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Question 11

The following information is available for Company ABC. (All amounts provided are in US dollars) Manufacturing Affiliate Sales Affiliate (Canada, income tax rate: (United States, income 40\% ) tax rate: 30\% ) Sales \_\_\_ \ 10,000 Cost of goods sold 5,000 \_\_\_ Operating expenses 1,000 \ 1,000 Taxable income Income taxes Net income -The United States decides to block funds leaving the country.What is the optimum transfer price?

(Multiple Choice)

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Question 12

Which of the following statements about transfer pricing is true?

(Multiple Choice)

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Question 13

The following information is available for Company ABC. (All amounts provided are in US dollars) Manufacturing Affiliate Sales Affiliate (Canada, income tax rate: (United States, income 40\% ) tax rate: 30\% ) Sales \_\_\_ \ 10,000 Cost of goods sold 5,000 \_\_\_ Operating expenses 1,000 \ 1,000 Taxable income Income taxes Net income -If the transfer price is $8,000,what is the net income in Canada?

(Multiple Choice)

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Question 14

Which of the factors affect the optimal transfer pricing?

(Multiple Choice)

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Question 15

Asian Antiques of Bangkok,Thailand,buys antiques in Asia and sells them via sales affiliates in the United Kingdom and the Unites States.The following payments matrix of inter-affiliate cash flows,stated in Thailand is forecasted for next month.

(Essay)

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Question 16

"Unbundling fund transfers" from an MNC and to its affiliates refers to the following activity:

(Multiple Choice)

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Question 17

Which of the following statements about multilateral netting system are correct? (i)- each affiliate nets all its inter-affiliate receipts against all its disbursements. (ii)- it transfers or receives a balance,depending on whether it is a net payer or receiver. (iii)- the net funds to be received by the affiliates will equal the net disbursements to be made by the affiliates. (iv)- only two foreign exchange transactions are necessary since the affiliates' net receipts will always be equal to zero. (v)- only two foreign exchange transactions are necessary since the affiliates' net disbursements will always be equal to zero.

(Multiple Choice)

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Question 18

ABC Trading Company of Singapore purchases spices in bulk from around the world, packages them into consumer size quantities and sells them through sales affiliates in Hong Kong and the Unites States. For a recent month, the following payments matrix of inter-affiliate cash flows, stated in Singapore dollars, was forecasted. ABC Trading Company Payments Matrix (SS000) Disbursements by: Singapore Hong Kong U.S. Receipts by: Singapore - 80 110 Hong Kong 16 -- 44 U.S. 22 50 -- -Calculate,in Singapore dollars,the amount that the inter-affiliate foreign exchange transaction will be reduced by with multilateral netting.

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Question 19

The following information is available for Company ABC. (All amounts provided are in US dollars) Manufacturing Affiliate Sales Affiliate (Canada, income tax rate: (United States, income 40\% ) tax rate: 30\% ) Sales \_\_\_ \ 10,000 Cost of goods sold 5,000 \_\_\_ Operating expenses 1,000 \ 1,000 Taxable income Income taxes Net income -Assume that the US and Canadian governments impose no restrictions on transfer pricing.What transfer price should Company ABC charge?

(Multiple Choice)

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Question 20

Assume that Y pays a tax deductible tariff of 7 percent on imported merchandise.Calculate the increase in annual after-tax profits if the higher transfer price of $1,250 per unit is used. (Round intermediate values to nearest whole percentage.)

Unexpected Funds blockage is a:

When a country enforces exchange controls the profits of a subsidiary in that country are referred to as:

The prices at which goods are sold by one division to another are called:

If inter-affiliate cash flows are uncorrelated with one another,what is the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members:

Using the national airlines of the host country that has enforced exchange rate controls is an example of:

Which of the following is not a basic method used by the internal revenue service (IRS)to establish an arm's-length price for tangible goods?

Efficient cash management techniques can:

Which of the following statements about transfer pricing is true?

Which of the factors affect the optimal transfer pricing?

Asian Antiques of Bangkok,Thailand,buys antiques in Asia and sells them via sales affiliates in the United Kingdom and the Unites States.The following payments matrix of inter-affiliate cash flows,stated in Thailand is forecasted for next month.

"Unbundling fund transfers" from an MNC and to its affiliates refers to the following activity:

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