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Worldwide Industries. a U.S.-based MNE, currently buys 150,000 chips a month from its British affiliate at $8 per unit. Worldwide then sells these chips for $20 per unit. Production costs borne by the British affiliate are $5 per unit. The U.S. and British corporate tax rates are 45% and 40%, respectively. Suppose the transfer price can be set at any level between $8 and $13. At what transfer price would corporate tax payments be minimized? Calculate the increase in monthly corporate net income using the optimal transfer price.

Financial Management, Finance

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