Reference no: EM133109981

Question - Cadbury is a UK MNC with affiliates and subsidiaries located internationally. Cadbury's Australian subsidiary sells 2,274 tons of sugar cane extract each year to the Swiss affiliate at a transfer price of AUD2,500 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 30% and 19.70%, respectively. Given this information, which of the following is the maximum amount that Cadbury can save in taxes each year by changing their current transfer price from AUD2,500 per ton to the optimal transfer price?