For its new electric car, a US multinational enterprise produces the electric motor and batteries in Mexico at a cost of $5,000. The rest of parts are produced in the US at a cost of $15,000, and the car is sold in the US for $25,000. The corporate income tax rate in Mexico is 20% and 40% in the US. If the goal of the multinational enterprise is to maximize its global after tax profit, what is the optimal transfer price and why?

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