Question: Santana Music is a U.S.-based MNC whose foreign subsidiary had pretax income of $55,000; all after-tax income is available in the form of dividends to

Santana Music is a U.S.-based MNC whose foreign subsidiary had pretax income of $55,000; all after-tax income is available in the form of dividends to the parent company. The local tax rate is 40%, the foreign dividend withholding tax rate is 5%, and the U.S. tax rate is 34%. Compare the net funds available to the parent corporation

(a) If foreign taxes can be applied against the U.S. tax liability and

(b) If they cannot.

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