Company EJ plans to build a new plant to manufacture bicycles. EJ sells its bicycles in...

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Company EJ plans to build a new plant to manufacture bicycles. EJ sells its bicycles in the world market for $500 per bike. I

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Answer 1

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Calculation of After-Tax profit per Bike

a)
	Province P
	Sale price per bike	$ 500
	Manufacturing Cost Per Bike	-$ 292
	Taxable Income	$ 208
	Tax @25%	$ 52
	After Tax Profit per bike	$ 156

	Province W
	Sale price per bike	$ 500
	Manufacturing Cost Per Bike	-$ 310
	Taxable Income	$ 190
	Tax @20%	$ 38
	After Tax Profit per bike	$ 152

b)
It is advisable to company EJ build a plant in Province P contributing profit ($156) is more then the Province W's profit($152).

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