Worldwide MNE produces mid-fi HD radios as follows. The high-tech components are produced in the South Korea at a cost of $17. These components are then sent to Vietnam where additional components are produced and the radios are assembled at cost of $10. The radios sell for $35. Your job as a junior analyst in Worldwide MNEs finance department is to evaluate different transfer prices for the South Korean components. You boss assigns you the task of evaluating the following transfer prices: $17, $21, and $25.

If the tax rate on corporate income in South Korea is 25% and 15% in Vietnam, which of the three transfer prices will minimize the firms tax liabilities and maximize its after-tax profit? Briefly explain