In preparing tor the board meeting, the Financial Director of Melbo is to evaluate the company's entry into the luxury watchmaking business based on the following financial intormation and assumptions: a) Assume the date of preparation of the capial budget i.e., today's date is 31 December 2022 . b) The exissing watch manufacturing plam will not be able to accommodate the manulacturing of the luxury watches. The existing plant was acquired on 1 January 2020 at a total cost of R400 milion and it was estimated that the selling price of the plant woukd be R115 million at the end of FY2027. SARS grants allowances on the plant over a period of 10 years using the straight-line method. A new plant will be acquired to produce the luxury watches. The cost of the plant will be incurred on 1 January 2023 and is estimated to be R150 million. SARS will grant allowances on the new plant. over a period of 8 years using the straight-line method. It is estimated that the new plant would generate a recoupment (profit per SARS calculation) of R36 875000 (based on an estimated selling price of R93 125000 at the end of FY2027. c) The marketing consulant submited final reports of the commissioned market study as well as an invoice of R500 000 during November 2022. Melbo immediately paid 80% of the inwoice and the balance of the invoice amourt is payable at the end of December 2022. d) In the FY2022, Melbo sold 300000 units of the existing watches. It is projected that the sales wolume of these watches would decrease by 10% per annum over the next five years (before taking into consideration the investment in the fuxury watch operations). The projected sale volumes of the existing range were revised because of the impact of the luxury watch range that will be sold by the company. Below are the projected sales volume of the luxury watches and the revised estimates of the sales volume of the existing range. e) The projected selling prices per unit for the existing watch and the luxury watch are R300 and R5 500 respectively. The estimated variable costs of production and selling are R120 per unit and R3 200 per unit for the existing and luxury watch respectively. These amounts are expected to remain constant over the next five years. 7) An initial working capital investment amounting to R22 500000 would be roquired on 31 December 2022. The incremental investmerk (i.e., movement - not total working capital) is expected to grow at a rate of 10\% per annum until it is fully recovered at the end of FY2027. g) In terms of the company's policy, all the operating divisions are allocated a portion of the corporate head office costs (e.g., legal, logistics, , real estate, and finance) on an equal basis, in the recont financial period, head office costs of R37 500000 were incurred. It is estimatod that the total head office costs will increase by 20% in the first year because of the appointment of the additional personnel in the marketing and research and development centres. h) All cash flows may be assumed to occur at the end of the year unless otherwise evident. i) The weighted average cost of capital or discount rate is 15% and management would like the project to payback from a nominal perspective within 3.5 years and 4.5 years from a discounted payback perspective. In preparing tor the board meeting, the Financial Director of Melbo is to evaluate the company's entry into the luxury watchmaking business based on the following financial intormation and assumptions: a) Assume the date of preparation of the capial budget i.e., today's date is 31 December 2022 . b) The exissing watch manufacturing plam will not be able to accommodate the manulacturing of the luxury watches. The existing plant was acquired on 1 January 2020 at a total cost of R400 milion and it was estimated that the selling price of the plant woukd be R115 million at the end of FY2027. SARS grants allowances on the plant over a period of 10 years using the straight-line method. A new plant will be acquired to produce the luxury watches. The cost of the plant will be incurred on 1 January 2023 and is estimated to be R150 million. SARS will grant allowances on the new plant. over a period of 8 years using the straight-line method. It is estimated that the new plant would generate a recoupment (profit per SARS calculation) of R36 875000 (based on an estimated selling price of R93 125000 at the end of FY2027. c) The marketing consulant submited final reports of the commissioned market study as well as an invoice of R500 000 during November 2022. Melbo immediately paid 80% of the inwoice and the balance of the invoice amourt is payable at the end of December 2022. d) In the FY2022, Melbo sold 300000 units of the existing watches. It is projected that the sales wolume of these watches would decrease by 10% per annum over the next five years (before taking into consideration the investment in the fuxury watch operations). The projected sale volumes of the existing range were revised because of the impact of the luxury watch range that will be sold by the company. Below are the projected sales volume of the luxury watches and the revised estimates of the sales volume of the existing range. e) The projected selling prices per unit for the existing watch and the luxury watch are R300 and R5 500 respectively. The estimated variable costs of production and selling are R120 per unit and R3 200 per unit for the existing and luxury watch respectively. These amounts are expected to remain constant over the next five years. 7) An initial working capital investment amounting to R22 500000 would be roquired on 31 December 2022. The incremental investmerk (i.e., movement - not total working capital) is expected to grow at a rate of 10\% per annum until it is fully recovered at the end of FY2027. g) In terms of the company's policy, all the operating divisions are allocated a portion of the corporate head office costs (e.g., legal, logistics, , real estate, and finance) on an equal basis, in the recont financial period, head office costs of R37 500000 were incurred. It is estimatod that the total head office costs will increase by 20% in the first year because of the appointment of the additional personnel in the marketing and research and development centres. h) All cash flows may be assumed to occur at the end of the year unless otherwise evident. i) The weighted average cost of capital or discount rate is 15% and management would like the project to payback from a nominal perspective within 3.5 years and 4.5 years from a discounted payback perspective