Catlow Corporation makes testing equipment used in hospitals. Usually, this equipment is made to order. However, this year, a client backed out of the deal, forfeiting a $50,000 penalty on an order worth $750,000. The U.S. division therefore has an unsold machine on which it has spent $625,000. It approached its European and Asian division heads as to whether they want the machine.
The European division says that it could pay up to $700,000 for the machine as it expects to sell the machine for $750,000. The Asian division is willing to pay $675,000 only, even though it expects to sell the machine for $775,000.
You know that the average tax rate is 45% in Europe, 20% in Asia, and 35% in the United States.

Required:
a. From the perspective of Catlow Corporation, where should the machine be sold? What is the profit-maximizing transfer price? Assume that Catlow can justify any transfer price from $625,000 to $750,000 to all involved tax authorities.
b. From the perspective of the U.S. division, which offer (from Europe or Asia) is more attractive? Why?
c. What are the benefits and costs of the corporate office stepping in to enforce the transfer as determined in part (a) rather than the transfer desired by the U.S. division in part (b)?