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The Nature and Wildlife Corporation has manufacturing facilities in country A and an assembly plant in country B. In June 2020, the company will ship

The Nature and Wildlife Corporation has manufacturing facilities in country A and an assembly plant in country B. In June 2020, the company will ship 1,000 units with a production cost of $65 per unit to its plant in country B. Its operating expenses in country A are $15,000 for the month. The income tax rate in country A is 20% and in country B it is 40%. The company plans to have a transfer price of $100 per unit. The final product can be sold in country B for $140. Country B's operating expenses are $10,000 during the month.

  1. How much will the combined profits of the two operations be in April 2021?
  2. Could the company benefit by changing the transfer price to $120?
  3. Now, suppose the income tax rate in country A is 40% while in country B it is 20%. What will the combined profit be if all of the other numbers are the same as they were in the original assignment description?
  4. What would be the result in question 3 if the company decreased its transfer price to $90?
  5. Provide a 100 word summary of how this can be applied to the current economy.

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