Mars is a US MNC with affiliates and subsidiaries located internationally. Mars Australian subsidiary sells 1,633 tons of sugar cane extract each year to the New Zealand affiliate at a transfer price of AUD3,400 per ton. Mars believes that the transfer price per ton of sugar cane extract can be set at any level between AUD1,620 and AUD3,740 without attracting attention from each countrys tax authorities. The Australian and New Zealand marginal tax rates on corporate income are 26% and 15.55%, respectively.

Given this information, which of the following is the maximum amount that Mars can save each year by changing their current transfer price from AUD3,400 per ton to the optimal transfer price?

a.

AUD303,754.33

b.

AUD58,020.49

c.

AUD235,734.33

d.

-AUD225,412.77, so it is better for them not to change the transfer price.

e.

None of the options in this question are correct.