Goal of the mne is to maximize its global after tax profit

Assignment Help Finance Basics

Reference no: EM131212771

A firm has affiliates in both Japan, whose corporate income tax rate is 40 percent, and Ireland, whose corporate income tax rate is 15 percent. The major activity of the Irish affiliate is to produce a special component that it sells to the Japanese affiliate, initially at a price of $18 per unit. The cost of producing the component in Ireland has just risen from $12 per unit to $14 per unit.

The controller of the MNE is considering three possible changes in the price of the component (for the sales between the Irish and the Japanese affiliate): Ignore the cost increase, and leave the price at $18 (no price change). Increase the price to $20, to reflect exactly the increase in cost. Increase the price to $22, and, if necessary, explain the price increase by making general reference to unavoidable cost increases at the Irish affiliate.

a. If the goal of the MNE is to maximize its global after-tax profit, which of these three should the controller choose? Why?

b. What does each national government think of this use of transfer pricing?

Reference no: EM131212771

Questions Cloud

Audit and make recommendations to improve consultation : The purpose of these assessments is to document, audit and make recommendations to improve consultation in your PCBU to be compliant to the WHS Act 2011, WHS Regulation and other relevant codes of practices.

Labor groups in the united states : Is their opposition to FDI defending only their special interest, or might it also be in the national interest? Explain.

Problem regarding the market interest rate : Suppose you win the lottery in 2010 when the jackpot amount is $162 million. You can receive the jackpot amount paid out evenly over 26 years or you can elect to take an immediate payment of $95 million, before taxes. Ignore all tax effects. Assum..

Replace the natural joins in the following expressions : Replace the natural joins in the following expressions by equivalent theta-joins and projections. Tell whether the resulting theta-joins form a commutative and associative group.

Goal of the mne is to maximize its global after tax profit : If the goal of the MNE is to maximize its global after-tax profit, which of these three should the controller choose? Why?

Determining the immediate payment : Suppose you win the lottery in 2010 when the jackpot amount is $162 million. You can receive the jackpot amount paid out evenly over 26 years or you can elect to take an immediate payment of $95 million, before taxes. Ignore all tax effects. Assum..

Prepare a production budget and manufacturing budget : Prepare a production budget. Ensure the accuracy of your data. Prepare a manufacturing budget. Ensure the accuracy of your data. Prepare a selling expense budget. Ensure the accuracy of your data.

Evaluating the entire expression : Make whatever assumptions you wish about the number of available main-memory buffers and the sizes of relations mentioned in E and F.

Factors contributed to failure of thai governments plan : In 2008 India and Vietnam restricted their rice exports to prevent increases in their domestic rice prices, and world rice prices temporarily tripled.- What factors probably contributed to the failure of the Thai government's plan?

User Account

All Pages