CORPORATE FINANCE(LL)
CORPORATE FINANCE(LL)
11th Edition
ISBN: 9781260430011
Author: Ross
Publisher: MCG
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Chapter 29, Problem 7CQ

Economies of Scale What does it mean to say that a proposed merger will take advantage of available economics of scale? Suppose Eastern Power Co. and Western Power Co. arc located in different time zones. Both operate at 60 percent of capacity except for peak periods, when they operate at 100 percent of capacity. The peak periods begin at 9:00 a.m. and 5:00 p.m. local time and last about 45 minutes. Explain why a merger between Eastern and Western might make sense.

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Transfer Pricing; International Considerations; Strategy As indicated in the chapter, determining the appropriate transfer price in a multinational setting is a very complex problem, with multiple strategic considerations. Consider as an example a U.S. company with a subsidiary in Italy and asubsidiary in Ireland. The Italian subsidiary produces a product at a cost of $1,000 per unit. This unitis then sold to the Irish subsidiary, which adds $100 of cost to each unit. The unit is then shipped tothe U.S. parent company, which adds an additional $100 of cost to each unit. The unit is then sold to aU.S. customer for $2,000. Assume that the tax rate in Italy is 30%, the tax rate in Ireland is 15%, andthe tax rate in the United States is 35%.Required1. Define the term transfer price. Why is transfer pricing strategically important to organizations?2. What creates income tax planning opportunities when determining transfer prices in a multinational setting? Where could one go to obtain…
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What is Transfer Pricing for Small Businesses?; Author: Nomad Capitalist;https://www.youtube.com/watch?v=_Q6nN3s1Xjs;License: Standard Youtube License