What is US tax liability on its Ethiopian subsidiary

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Reference no: EM132030322

Tailor Johnson, a U.S. maker of fine menswear, has a subsidiary in Ethiopia. This year, the subsidiary reported and repatriated earnings before interest and taxes (EBIT) of 199 million ETB (Ethiopian birrs). The current exchange rate is 9.4828 ETB/USD or S1=0.1055 USD/ETB. The Ethiopian tax rate for this activity is 15%. Tax law in the United States requires Tailor Johnson to pay taxes on the Ethiopian earnings at the same rate as on profits earned in the United States, which is currently 43%.

However, the United States gives a full tax credit for foreign taxes paid up to the amount of the U.S. tax liability. What is Tailor Johnson's U.S. tax liability on its Ethiopian subsidiary?

Instructions:

Tailor Johnson's U.S. net tax liability on its Ethiopian subsidiary is? million USD. (Round to three decimal places.)

Reference no: EM132030322

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