Question 5 (12 points) Valient, Inc. has a Pennsylvania-based division that produces electronic components, with a very strong domestic market for circuit no. 222. The variable production cost is $140, and the division can sell its entire output for $190. Valient is subject to a 30% income tax rate. Alternatively, the Pennsylvania division can ship the circuit to a division that is located in Mississippi, to be used in the manufacture of a global positioning system (GPS). Information about the global positioning system and Mississippi's costs follow. Selling price: $380 Circuit shipping and handling fees to Mississippi: S10 Labor, overhead, and additional material costs of GPS: S120 A) Assume that the transfer price for the circuit was $160. How would Pennsylvania's divisional manager likely react to a corporate decision to transfer the circuits to Mississippi? Why? (1 point) B) Assume that the Mississippi division has no external supplier of circuit no.222. Compare with the case with no transfer, how would a transfer of 100 units at the price of $160 change the after-tax profits of the Pennsylvania division, Mississippi division, and the Valient company as a whole? (3 points) C) Assuming that transfers took place at a price higher than $160, how would the revised price change Valient's after-tax profit compared to the case in B? Briefly explain. (2 points) D) Assume that the Pennsylvania has idle capacity of 20 units. Redo part B: Compare with the case with no transfer, how would a transfer of 100 units at the price of $160 change the after-tax profits of the Pennsylvania division, Mississippi division, and the Valient company as a whole? (3 points) E) Assume that the Mississippi state decides to increase the income tax rate from the national level of 30% to the state-specific level of 35%. Redo part (C): how would an increase of transfer price from $160 to above change the after-tax profit of Valient? You do not need to calculate the change. Just indicate the direction of change and provide brief explanation. (3 points)