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Determining the annual opportunity cost of cadbury

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Cadbury is a UK MNC with affiliates and subsidiaries located internationally. Cadbury's Australian subsidiary sells 3,365 tons of sugar cane extract each year to the Swiss affiliate at a transfer price of AUD2,300 per ton. Cadbury believes that the transfer price per ton of sugar cane extract can be set at any level between AUD1,800 and AUD4,900 without attracting attention from each country's tax authorities. The Australian and Swiss marginal tax rates on corporate income are 25% and 15.70%, respectively.

What is the annual opportunity cost Cadbury incurs if they do not act rationally?

Reference no: EM133120067

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