Milo Limited, South Africa, is a specialist manufacturer of security doors and gates. In seeking to expand its operations, it could acquire a Dutch subsidiary company, Nabby lGuard, or set up a new division in its home market. The relevant gures for these two options are: Set up new division at home 0 lCost of setting up premises lCost of machinery Annual sales Annual variable cost Head office expenses 0 The Head ofce expense includes existing head ofce expense of R1 000 000 I Depreciation: machinery 10% on cost annually Acquisition O Acquire shares from existing shareholders Redundancy costs Annual Sales Annual variable costs Annual fixed costs Consultants fees Additional information: - The project is expected to last for 10 years. Milo Limited, current cost ofcapital is 13%. Rand 25000000 14000000 41500000 13000000 5000000 3900000 Euro 13000000 3'000000 27000000 15000000 5000000 6300500 The Dutch ination is expected to be below the South African inflation by 2% per year, throughout the life of this investment. The current exchange spot rate is R20 to the Euro l:l. Required: 1.1 Make all necssary calculations for the two options. 1.2 Advise Milo Limited on the viability ofthesetwo opportunities. {22} [3}