How can firms use transfer prices strategically

Question

Question 1) How can firms use transfer prices strategically? What role does GAAP play in how firms determine transfer prices?

Question 2) Consider the following information about a potential project:

Investment required                              $2,000,000
Expected annual project revenue            $3,600,000
Expected annual project expenses          $3,200,000
Required rate of return                                12%
Current division return on investment           18%

Question 3: Perform DuPont Analysis on this project.

Question 4: What is the project's residual income?