Optimal Transfer PriceScenario: Subsidiary X sells 1000

Optimal Transfer PriceScenario: Subsidiary X sells 10000 units to Subsidiary Y annually. The marginal income tax rate for Subsidiary X is 30% and the marginal income tax rate for Subsidiary Y is 45%. The transfer price per unit is currently $5000 but it is likely to adjust at any level between $5000 and $5500. Your Task: Derive a formula to determine the increase in the annual after-tax profits by selecting the optimal transfer price. Then calculate to adjust the optimal transfer price.Grading CriteriaMaximum PointsAccurately derived the formula to determine the increase in the annual after-tax profits by selecting the optimal transfer price.25Accurately calculated the optimal transfer price.25Presented a structured document free of spelling and grammatical errors.5Properly cited sources using APA format. 5Total60
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