Question
18. Daisan Company is in the process of deciding where to establish a European manu- facturing operation: France, Spain, or Sweden. Daisan's home country
18. Daisan Company is in the process of deciding where to establish a European manu- facturing operation: France, Spain, or Sweden. Daisan's home country does not have a tax treaty with any of these countries. Regardless of location, the operation is expected to generate pretax income of 1 million euros annually. The operation will distribute 100 percent of its after-tax income to Daisan Company as a dividend each year. Required: a. Using the information on effective income tax rates and withholding tax rates pro- vided in Exhibits 8.1 and 8.3, determine the net amount of dividend that Daisan would receive annually from an investment in each of these three countries. b. If maximizing after-tax dividends is the sole criterion, in which of the three coun- tries should Daisan locate its European operation?
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