DD Limited, South Africa, is a specialist manufacturer of electronic scooters. In seeking to expand its operations, it could acquire a French subsidiary company, AM Limited, or set up a new division in its home market.

The relevant figures for these two options are:

Set up new division at home

Cost of setting up premises

Cost of machinery

Annual sales

Annual variable cost

Additional head office expenses

Existing head office expenses

Depreciation: machinery $10\%$ on cost annually

Acquisition

Acquire shares from existing shareholders

Redundancy costs

Annual Sales

Annual variable costs

Annual fixed costs

Consultants fees

Rand

$22440000$

$8700000$

$33000000$

$14050000$

$1300000$

$8220000$

$870000$

Euro

$28000000$

$5000000$

$39000000$

$18000000$

$10000000$

$750000$

Addrional information:

The project is expected to last for $7$ years

DO Limited, current cost af captal is $10A.$

The French infiation is expected to be below the South African intiation by $1\%$ per year throughout the life of this investment:

The cirrent oxchaige spot fateis R$2440$ to the Euro $6$

Required:

Compute the nucessary calculations and advise DO Traders Lmited if it is worth investing in neither in che or

$25$

both of these two opportunities

Marke: