Varzesh is a sports equipment company with its corporate headquarters in country A and has three wholly owned subsidiaries in countries B, C and D. The corporate income taxes are 21%, 25%, 29% and 22% for countries A, B, C, and D respectively. Varzesh is going to manufacture a new sports ball called Toop in, and only in, one of the three countries: B, C, or D. The manufacturing cost is $100, and it will be sold in equal quantities in all four countries for $370. The transfer price for Toop is $320. There are no other costs or revenues.
1 - Which country is the best choice to manufacture the Toop in order to minimize taxes paid globally?
2 - If Varzesh sells only one unit in each country, then what is the minimum total tax amount paid globally? Enter your answer rounded to the first decimal place.
3 - If the customs authority pushes Varzesh to fix the transfer price at $260, then which country is the best choice to manufacture the Toop in order to minimize taxes paid globally?
4 - If the transfer price is equal to $260, what is the minimum total tax amount paid globally if Varzesh sells only one unit in each country? Enter your answer rounded to the first decimal place.
Answers: 2
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Varzesh is a sports equipment company with its corporate headquarters in country A and has three who...
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