The U.S. and Canada have signed a tax treaty which calls for the use of the credit method. The U.S. tax rate is 40% and the Canadian tax rate is 15%.

If a Canadian firm is considering placing a subsidiary in the US, the then appropriate tax rate for use in capital budgeting analysis by the Canadian firm will be:

A) 40%

B) 55%

C)49%

D) 25%