20.27 Suppose a foreign subsidiary earns $1 million after paying foreign income taxes of $800,000. If the subsidiary pays a dividend of $600,000, what is the amount of the indirect foreign tax credit that its parent will receive?

a) $480,000

b) $800,000

c) $400,000

d) it receives no foreign tax credit

20.28 Suppose a foreign subsidiary earns $2 million after paying foreign income taxes of $500,000. If the subsidiary retains all of its earnings, what is the amount of the indirect foreign tax credit that its parent will receive?

a) $500,000

b) $250,000

c) $400,000

d) it receives no foreign tax credit

20.31 Arco ships 15 million barrels of refined oil monthly from Arco Canada to Arco U.S. Arco U.S. has to pay a U.S. ad valorem tariff of 6%. Tax accountants advise Arco that it can set the transfer price in the range of $15 $18 per barrel of product. The current price is set at $16 a barrel. If Arco-Canada's tax rate is 50% (the U.S. rate is 46%., what is the incremental cash flow per month associated with using the optimal transfer price?

a) $236,000

b) $1,343,000

c) $1,086,000

d) $32,670

20.32 Suppose affiliate A sells 10,000 chips monthly to affiliate B at a unit price of $15. A's tax rate is 45% and B's tax rate is 55%. In addition, B must pay an ad valorem tariff of 12% on its imports. If the transfer price on chips can be set anywhere between $11 and $18, how much can the total monthly cash flow of A and B be increased by switching to the optimal transfer price?

a) $3,000

b) $4,000

c) $1,840

d) $1,380