Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A US MNC has affiliates and subsidiaries located internationally. The Canadian subsidiary sells 333 tons of good X each year to the Mexican affiliate at
A US MNC has affiliates and subsidiaries located internationally. The Canadian subsidiary sells 333 tons of good X each year to the Mexican affiliate at a transfer price of CAD 1,315 per ton. The MNC expects that the transfer price be set at any level between CAD1,469 and CAD2,740 without raising suspicion from each country's tax authorities. The corporate tax rates in Canada and Mexico are 18% and 27%, respectively. Given this information, which of the following is the maximum amount that the MNC can save each year by changing their current transfer price from CAD 1,315 per ton to the optimal transfer price? a. CAD42,707.25 b. CAD48,451.50 c. CAD38,091.87 d. -CAD4,615.38. It is optimal to not change the transfer price. e. None of the options in this question are correct
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started