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

Answer #1

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


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

b)	As after tax profit in the Province P is greater than Province W
	Complany should build its new plant in Province P

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Answer 2

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