International Accounting Saint Leo University Mod 6 Questions

Saint Leo Corporation (a U.S.-based company) has a wholly-owned subsidiary in Vietnam that manufactures insulated wire at a cost of $3 per meter. Saint Leo Corporation imports the insulated wire and sells it to U.S. retailers at a price of $12 per meter. The following information applies: Income tax rate United States 21% Import duty rate 20% Withholding tax rate on dividends ———- Vietnam 12% —–6% Import duties are levied on the invoice price and are deductible for income tax purposes. The Vietnam subsidiary must repatriate 100 percent of after-tax income to Saint Leo Corp. each year. Saint Leo Corp. has determined an arm’slength range of reliable transfer prices to be $5.00–$6.00. Required: 1Determine the transfer price within the arm’s-length range that would maximize Saint Leo Corp’s after-tax cash flow from the sale of insulated wire in the United States. 2- Now assume that the withholding tax rate on dividends is 0 percent. Determine the transfer price within the arm’s-length range that would maximize Saint Leo Corp’s after-tax cash flow from the sale of insulated wire in the United States. Students must provide details work for each question.