What transfer price should Princeton International use

Assignment Help Microeconomics

Reference no: EM131820922

Question: Multinational Transfer Prices Princeton International has production and marketing divisions throughout the world. It produces one particular product in Ireland, where the income tax rate is 24%, and transfers it to a marketing division in Japan, where the income tax rate is 45%. Assume that Japan places an import tax of 13% on the product and that import duties are not deductible for income tax purposes. The variable cost of the product is £500 and the full cost is £800. Suppose the company can legally select a transfer price anywhere between the variable and full cost.

1. What transfer price should Princeton International use to minimize taxes? Explain why this is the tax-minimizing transfer price.

2. Compute the amount of taxes saved by using the transfer price in requirement 1 instead of the transfer price that would result in the highest taxes.

Reference no: EM131820922

Questions Cloud

Describe the potential market for this application : Examine and contrast the differences between off-the-shelf packaged software, and custom software.

Analyze when deciding whether or not to purchase the stock : Suggest at least two items from each statement that investors should analyze when deciding whether or not to purchase the company's stock.

Physical and performance characteristics of ncaa division : Speed, size, and strength are thought to be important factors in football performance. The article "Physical and Performance Characteristics

Describe the types of bonds the chosen company issues : Describe the types of bonds the chosen company issues, and make a recommendation to the investor as to which type of bond would provide the most value.

What transfer price should Princeton International use : Multinational Transfer Prices Princeton International has production and marketing divisions throughout the world. It produces one particular product in Ireland

Prepare a statement of cash flows for cavamanlis inc : The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of year 2014. Prepare a statement of cash flows for the year 2014.

Discussion of the pros and cons of each proposed contract : What factors would affect Tamura International's choice of employment contract? Include a discussion of the pros and cons of each proposed contract.

Examine an organizational problem from conflict perspective : Different theory assumptions lead us to different questions. If you examined an organizational problem from a structural perspective.

Determine relative performance of the companies : Compute the return on sales, turnover on capital, and ROI for the three companies, and comment on the relative performance of the companies as thoroughly.

User Account

All Pages