1. **Suppose an MNC subsidiary buys 100 input units from its parent at a price o

Q: 1. **Suppose an MNC subsidiary buys 100 input units from its parent at a price o

2. 1. Subsidiary profits calculation Sales (100* $8) 800 Less: Inputs (100*$4) -400 Additional production costs -100 Profit before tax 300 Tax @ 25% -75 Profit after tax 225

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1. **Suppose an MNC subsidiary buys 100 input units from its parent at a price of $4 each. It has $300 in additional production costs, and sells its 100 units of output for $8 to the MNC parent. The subsidiary pays a 25% local profit tax. The MNC parent sells the output at home for $10, and its cost of producing inputs is $1. The parent pays a profit tax of 20% at home on repatriated profits. what is the subsidiary net profit? Assume no selling costs at home. What is the MNC parent's total profit from the operation? (1+1-2)

Explanation / Answer

1. Subsidiary profits calculation Sales (100* $8) 800 Less: Inputs (100*$4) -400 Additional production costs -100 Profit before tax 300 Tax @ 25% -75 Profit after tax 225

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1. **Suppose an MNC subsidiary buys 100 input units from its parent at a price o

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