Assignment 1 1. The management of Mouza Company must decide between locating a new branch office in foreign Jurisdiction F or foreign Jurisdiction G. Regardless of location, the branch operation will use tangible property (plant and equipment) worth AED10 million and should generate annual gross receipts of AED2 million. Jurisdiction F imposes an annual property tax of 4 percent of the value of business property and a 15 percent gross receipts tax. Jurisdiction G imposes no property tax but imposes a 30 percent gross receipts tax. Solely on the basis of these facts, should Mouza Co. locate its new branch in Jurisdiction F or Jurisdiction G? 2. Jurisdiction B's tax system consists of a 6.5 percent general sales tax on retail goods and selected services. Over the past decade, the average annual volume of sales subject to this tax was $500 million. The jurisdiction needs to increase its tax revenues by approximately $5 million each year to finance its spending programs. The taxing authorities are considering two alternatives: a 1 percent increase in the sales tax rate or a new 2 percent tax on the net income of corporations doing business in the jurisdiction. Based on recent economic data, the annual net income subject to the new tax would be $275 million. However, the jurisdiction would have to create a new agency responsible for enforcing and collecting the income tax. The estimated annual cost of the agency is $500,000. Jurisdiction B borders four other taxing jurisdictions, all of which have a general sales tax and two of which have a corporate income tax. A. Based on a static forecast, how much incremental revenue would Jurisdiction B raise under each alternative? B. Assume that the taxing authorities in Jurisdiction B want a dynamic forecast of the incremental revenues under each alternative. What additional facts would be important in making such a forecast, and why?