Derive the effective marginal tax rate

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Question - Affiliate A sells 6,000 units to Affiliate B per year. The marginal income tax rate for Affiliate A is 27.6 percent and the marginal income tax rate for Affiliate B is 35 percent. Additionally, Affiliate B pays a tax-deductible tariff of 5.5 percent on imported merchandise. The transfer price per unit is currently $1,983, but it can be set at any level between $1,983 and $2,138. Derive the effective marginal tax rate and calculate the increase in annual after-tax profits if the higher transfer price of $2,138 per unit is used. (USD, no cents).

Reference no: EM133025475

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