Scenario: Subsidiary X sells 10000 units to Subsidiary Y annually. The marginal

Scenario: 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.You can refer to Chapter 21: International Tax Environment and Transfer Pricing to solve this problem.Submit your response to the
10 2013.