TRANSFER PRICING ANALYSIS TEMPLATE - US Operation Importing Foreign Operation US Operation Consolidated Sale Cost of sales: Product cost Transportation cost mport duty Gross profit Less: Other costs Taxable income Less: Income tax After-tax income Less: Withholding Taxes Net Cash Flow (per unit) Net Cash Flow (total) Effective Tax Rate INPUT VALUES Retail price Transfer price TP Basis: Cost to produce Transportation cost Transportation cost paid by Foreign Source other costs US other costs Volume Expected % Dividend Repatriation - Import Duty US income tax rate Foreign income tax rate Foreign withholding tax rateLivingston Transfer Price Livingston U.S. has a whollyr owned subsidiary [Optipels, LLC] in Israel that manufactures ber optic scalpels used in highlyspecialized surgeries. The production costs amount to $350.00 per unit. Livingston is expecting to import approximately 40,000 units this year and sell them to hospitals and surgical centers in the U.S. at a price of$975.00 per unit. The following information applies: United States Israel Income tax rate 21.0% 23.0% Import duty rate 63% 15.0% Withholding tax rate on dividends - 12.5% Dutipels. LLC pays for shipping to the U.S. at $10.00 per unit. Import duties are levied on the invoice [transfer] price. The Israeli Shekel [ILS] is relativer stable and as such the subsidiary is expected to repatriate only 25% of its income as dividends to Ijvingston U.S. Dgtipels. LLC has excess capacity and supplies other wholesalers with their product, selling them at an average price of 5450.00. The scalpels delivered to these other wholesalers require slightly different packaging, branding, and marketing and as a result, the company estimates the value-add ed is 515.00 per scalpel. Production costs are not affected by these changes. In addition to the costs directly related to the product, Oggipels, LLC incurs other operating costs of 513.00 per scalpel and Livingston incurs other operating costs of $50.00 per unit. There are several competitors to Livingston in the market. After researching Standard 8:. Poor's Industry Surveys, Livingston estimates that these competitors gene rate an average gross prot of 40%. Required: a. Determine the possible transfer prices under the [1] Comparable Uncontrolled Price method and [2] Resale Price {Comparable Gross Prot] method. b. Assume that either method above is acceptable to both the US and Israeli taxing authorities. Determine which transfer price would maximize Livingston's worldwide aftertax cash flow from the sale of the scalpels. Be sure to document your workfcalculations