Companies arbitrarily set transfer prices for a variety of reasons, including tax minimization strategies, competition in the foreign country, and markets in the foreign country.

1. Discuss five (5) strategic rationales of Multinational companies for establishing arbitrarily high or low transfer price.

(15 marks)

b) Briefly explain how nationality of the parent company affects the transfer pricing system utilized by multinationals.

(5 marks)

(Total: 20 marks)

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