Assume that IBM’s Canadian subsidiary sells 1,500 personal computers per month to the German affiliate at a transfer price of \($2,700\) per unit. The tax rates are 45 percent for Canada and 50 percent for Germany. The transfer price can be set at any level between

\($2,500\) and \($3,000.

(a)\) At what transfer price will IBM taxes be minimized? Explain.

(b) If the German government imposes an import duty of 15 percent on imported personal computers, at what transfer price will IBM tariffs be minimized? Explain.