QUESTION FOUR (25 Marks) Mamma Limited, South Africa, is a specialist manufacturer of electronic scooters. In seeking to expand its operations, it could acquire a French subsidiary company, Lux Limited, or set up a new division in its home market The relevant figures for these two options are: Set up a new division at home Rand Cost of setting up premises 8 440 000 Cost of machinery 7 700 000 Annual sales 52 000 000 Annual variable cost 14 000 000 Additional head office expenses 1 750 000 Existing head office expenses 1 005 000 Depreciation: machinery 10% on cost annually 770 000 Acquisition Euro Acquire shares from existing shareholders 5 000 OCO Redundancy costs 800 000 Annual Sales 11 000 000 Annual variable costs 3 000 000 Annual foxed costs 2000 COO Consultants fees 600 000 Additional information The project is expected to last for 5 years. Mamma Limited, the current cost of capital is 119. The French inflation is expected to be beicw the South African inflation by 2x per year, throughout the life of this investment. The current exchange spot rate is R21.82 to the Euro (e) Required Compute the necessary calculations and advise Mamma Traders Limited if it is worth investing in neither, in one or both of these two opportunities. (25 marks) QUESTION FOUR (25 Marks) Mamma Limited, South Africa, is a specialist manufacturer of electronic scooters. In seeking to expand its operations, it could acquire a French subsidiary company, Lux Limited, or set up a new division in its home market The relevant figures for these two options are: Set up a new division at home Rand Cost of setting up premises 8 440 000 Cost of machinery 7 700 000 Annual sales 52 000 000 Annual variable cost 14 000 000 Additional head office expenses 1 750 000 Existing head office expenses 1 005 000 Depreciation: machinery 10% on cost annually 770 000 Acquisition Euro Acquire shares from existing shareholders 5 000 OCO Redundancy costs 800 000 Annual Sales 11 000 000 Annual variable costs 3 000 000 Annual foxed costs 2000 COO Consultants fees 600 000 Additional information The project is expected to last for 5 years. Mamma Limited, the current cost of capital is 119. The French inflation is expected to be beicw the South African inflation by 2x per year, throughout the life of this investment. The current exchange spot rate is R21.82 to the Euro (e) Required Compute the necessary calculations and advise Mamma Traders Limited if it is worth investing in neither, in one or both of these two opportunities. (25 marks)