Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Apple Limited is a South African based manufacturer of Generators, an award - winning generator. The company is currently investigating two investment projects. The information
Apple Limited is a South African based manufacturer of Generators, an awardwinning generator. The company is currently investigating two investment projects. The information is given below: Project South Africa Involves extending the companys production facility in KwaZulu Natal. The plant will cost R million and is expected to create an additional annual profit of R million for the years life of the project. The following expenses were included in the annual profit: Depreciation was calculated on the straightline method, over the life of project. Share of existing overheads, borne by head office amounting to Rpa Additional fixed cost of R Project Taiwan Involves setting up an independent manufacturing facility in Taiwan. The cost of the facility would be an initial outlay Taiwan dollars. This would result in: annual profit of Taiwan dollars, for the years of the project. The annual fixed costs and variable costs are and Taiwan dollars respectively. These costs were not included in the profit calculation. Consultant fees of Taiwan dollars were incurred and included in the calculation of profit for Project Taiwan. Note: Apple Limited current cost of capital is The Taiwanese inflation is expected to exceed the South African inflation by pa throughout the life of the project. The current spot rate exchange is Taiwan dollars to the Rand. Required: Compute the necessary calculations and advise Apple Limited if it is worth investing in neither, in one or both of these two opportunities.
Apple Limited is a South African based manufacturer of Generators, an awardwinning generator. The company is currently
investigating two investment projects. The information is given below:
Project South Africa
Involves extending the companys production facility in KwaZulu Natal. The plant will cost R million and is expected to
create an additional annual profit of R million for the years life of the project.
The following expenses were included in the annual profit:
Depreciation was calculated on the straightline method, over the life of project.
Share of existing overheads, borne by head office amounting to Rpa
Additional fixed cost of R
Project Taiwan
Involves setting up an independent manufacturing facility in Taiwan. The cost of the facility would be an initial outlay
Taiwan dollars. This would result in:
annual profit of Taiwan dollars, for the years of the project.
The annual fixed costs and variable costs are and Taiwan dollars respectively. These costs
were not included in the profit calculation.
Consultant fees of Taiwan dollars were incurred and included in the calculation of profit for Project Taiwan.
Note:
Apple Limited current cost of capital is
The Taiwanese inflation is expected to exceed the South African inflation by pa throughout the life of the project.
The current spot rate exchange is Taiwan dollars to the Rand.
Required:
Compute the necessary calculations and advise Apple Limited if it is worth investing in neither, in one or both of these two
opportunities.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started