WISsub annually resells to industrial manufacturing companies approximately 30,000 industrial ovens purchased from FORCo, its foreign parent, that are neither branded nor warranted. FORCo also sells 5,000 industrial ovens to an independent third party in Canada for $100,000 each. Unlike the industrial ovens sold to WISsub, the industrial ovens sold in Canada are warranted and bear the valuable FORCo label.

Suppose that the comparable profits methodology is the best method. Further assume that your search for comparable companies preliminarily includes those on the list below with all return on sales figures being a proper average of the last three taxable years. Beta Co. a distributor of small video recording devices. Return on Sales: (2.5%). Cash Cow a distributor of heavy duty motors that are used in manufacturing commercial grade kitchen equipment. Return on Sales: 5%. Freight Forward, Inc. a provider of freight forwarding services to distribution companies trying to sell products in North America. Return on Sales: 20%. Jet Electro a manufacturer of high-tech gadgets. Return on Sales: 7%. Acme a distributor of heavy manufacturing-oriented equipment. Return on Sales: 5.5%. Mountain Top, Inc. a distributor of heavy machinery that makes mountain clearing equipment. Return on Sales: 10%. Oven Co. a distributor of toy ovens for children. Return on Sales: 4%. Sonar Co. a distributor of sonar tracking devices used by fishermen. Return on Sales: 10%. UnderWater Co. a distributor of heavy equipment used to create man-made lakes. Return on Sales: 3.5%.

What is the arm's length range?

Question 9 options:

1)

3.5%-10%

2)

2.5%-5%

3)

5%-5.5%

4)

2.5%-20%