Which of the Following Statements About Transfer Pricing Is True

question 5

Multiple Choice

Which of the following statements about transfer pricing is true?

• A)the higher the transfer price, the larger the gross profits of the transferring division relative to the receiving division
• B)very high markup policy used in the transfer pricing to a subsidiary makes the adjusted present value (APV) of that subsidiary's capital expenditure appear less attractive
• C)very low markup policy used in the transfer pricing to a subsidiary makes the adjusted present value (APV) of that subsidiary's capital expenditure appear less attractive
• D)a and b

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Definitions:

Material Alteration

A significant change to a document that affects its legal meaning or effect, often rendering it void if done without consent from all parties involved.

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Additional money required to be paid beyond what has already been agreed upon or expected.

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Condition Precedent

A condition that must be satisfied before a contract may come into effect.