Suppose affiliate A sells 10,000 chips monthly to affiliate B at a unit price of $15.A's tax rate is 45% and B's tax rate is 55%.In addition,B must pay an ad valorem tariff of 12% on its imports.If the transfer price on chips can be set anywhere between $11 and $18,how much can the total monthly cash flow of A and B be increased by switching to the optimal transfer price?
A) $3,000
B) $4,000
C) $1,840
D) $1,380
Correct Answer:
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