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19. Vlado Corporation (a U.S.-based company) has a wholly-owned subsidiary in Moldova that manufactures insulated...

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19. Vlado Corporation (a U.S.-based company) has a wholly-owned subsidiary in Moldova that manufactures insulated wire at a cost of $3 per meter. Vlado imports the insulated wire and sells it to U.S. retailers at a price of $12 per meter. The following information applies: United States Moldova 12% Income tax rate.. Import duty rate.... Withholding tax rate on dividends.. 21% 20% 6% Import duties are levied on the invoice price and are deductible for income tax pur- poses. The Moldovan subsidiary must repatriate 100 percent of after-tax income to Vlado each year. Vlado has determined an arm's-length range of reliable transfer prices to be $5.00-$6.00. Required: a. Determine the transfer price within the arm's-length range that would maximize Vlado's after-tax cash flow from the sale of insulated wire in the United States. b. 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 Vlado's after-tax cash flow from the sale of insulated wire in the United States

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