Do you think it is ethical for companies like Microsoft to continue to hold cash overseas in order to avoid paying U.S. corporate income taxes? Is this practice always in the best interests of the company’s shareholders?  What do you think are the opportunity costs of holding tens of billions of dollars of cash in foreign locations? What potential benefits might accrue to Microsoft shareholders if it returned some of that cash to the United States?

Question 1: You are in a group meeting regarding an issue facing your firm’s wholly owned subsidiary in Argentina, which manufactures component parts for your U.S. assembly operations. The subsidiary has been financed by loans in US dollars from a bank in the United States.  This loan is due in a year, and the subsidiary will have to remit the funds to pay this loan. One of the analysts in your planning unit has reported that the Argentina currency, the pesos, might still depreciate by 25% percent against the dollar on the foreign exchange markets over the next year.  What are the implications of this devaluation on the subsidiary and on the company?  What actions, if any, would you recommend?

Q 2Read the articles below and feel free to refer to related articles and respond to the questions below.

http://blogs.wsj.com/deals/2011/05/11/dealpolitik-lesson-from-microsoftskype-congress-must-fix-corporate-tax-law/ (Links to an external site.)Links to an external site.

http://thinkprogress.org/economy/2011/05/13/165902/microsoft-skype-tax-havens/ (Links to an external site.)Links to an external site.

Do you think it is ethical for companies like Microsoft to continue to hold cash overseas in order to avoid paying U.S. corporate income taxes? Is this practice always in the best interests of the company’s shareholders?  What do you think are the opportunity costs of holding tens of billions of dollars of cash in foreign locations? What potential benefits might accrue to Microsoft shareholders if it returned some of that cash to the United States?

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