Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Fernhurst Co (SD 2016) – modified – sensitivity to selling price (foreign subs)
- This topic has 3 replies, 2 voices, and was last updated 2 years ago by
John Moffat.
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- March 13, 2022 at 2:26 pm #651219
Hello John,
I understand the approach and explanation you provided in the following (already closed) forum topic relevant to Fernhurst (SD 2016), requirement b) = sensitivity analysis:
https://opentuition.com/topic/fernhurst-2/Could you please help me to understand the logic how this would work if it is part of a scenario with a foreign subsidiary i.e. assuming we are looking for sensitivity of the NPV to a change in the selling price where the sales revenue is coming from the country where we have the foreign subsidiary. The tax in the foreign country is 20% and tax in the home country is 30% + we have the DTT in place.
Would I just simply use 70% of the revenue for such calculation assuming the home country tax is the total relevant tax applicable in this very case? Technically, it may be paid as 20% tax in the country of origin and 10% additional tax per DTT on remittance, but this should not change the logic I presume.
Thank you,
MartinMarch 13, 2022 at 4:53 pm #651226This is hypothetical because I do not think that the examiner would ever introduce that complication.
However if he did then the logic would indeed stay the same and we would do as you have written.
March 14, 2022 at 12:45 pm #651265Thank you.
March 14, 2022 at 3:55 pm #651275You are welcome 🙂
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