Orange co set up a Bermuda subsidiary to hold the Orange co patents, and technology, at a time when the U.S. corporate tax rate was 25% and the Bermuda corporate tax rate was 0%. In that year, Orange co earned $10 billion in U.S. profits (before licensing payment to subsidiary), and paid $6 billion to the Bermuda subsidiary for the right to license the Orange co patents, and technology. For questions 1 and 2, further assume that Orange co. does not repatriate any profit from the Bermuda subsidiary to the U.S.

1. What was the total that Orange Co. owes in U.S. income tax in year 10?

2. What was Orange Co.'s total tax savings in year 10 due to setting up the Bermuda subsidiary?

3. How much would Orange Co. owe in additional U.S. taxes if it repatriated the Bermuda profits back to the U.S.?