case-12-2-Review Case 12-2 Global Electronics Company. Address the four questions at the end of the case. Summarize your findings in a 3-5 page paper

Describe in detail one possible transfer pricing tactic that a company may use to minimize costs. Do you think this tactic has merit in todays economic environment?LG-Malay is a Malaysian taxpayer, and Electronic Superstores is a U.S. tax- payer. Assume the following tax rates apply: U.S. ad valorem import duty . . . . . . . . . . . . . . . . . . . 20% U.S. corporate income tax rate . . . . . . . . . . . . . . . . . 35% Malaysian income tax rate . . . . . . . . . . . . . . . . . . . . . 15% Malaysian withholding tax rate . . . . . . . . . . . . . . . . . 30% Required 1. Determine three possible prices for the sale of laser guitars from LG-Malay to Electronic Superstores that comply with U.S. tax regulations under ( a ) the com- parable uncontrolled price method, ( b ) the resale price method, and ( c ) the cost- plus method. Assume that none of the three methods is clearly the best method and that GEC would be able to justify any of the three prices for both U.S. and Malaysian tax purposes. not repatriated back to GEC in the United 2. Assume that LG-Malays prof ts are States as a dividend. Determine which of the three possible transfer prices maxi- mizes GECs consolidated after-tax net income. Show your calculation of consol- idated net income for all three prices. You can assume that Electronic Superstores distributes 100 percent of its income to GEC as a dividend. However, there is a 100 percent exclusion for dividends received from a domestic subsidiary, so GEC will not pay additional taxes on dividends received from Electronic Superstores. Only Electronic Superstores pays taxes on the income it earns. are 3. Assume that LG-Malays prof ts repatriated back to GEC in the United States as a dividend and that Electronic Superstores prof ts are paid to GEC as a dividend. Determine which of the three possible transfer prices maximizes net after-tax cash f ow to GEC. Remember that dividends repatriated back to the United States are taxable in the United States and that an indirect foreign tax credit will be allowed by the U.S. government for taxes deemed to have been dou62206_ch12_586-620.indd 619 dou62206_ch12_586-620.indd 6