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

The relevant figures for these two options are:

Additional information: -

The project is expected to last for 7 years. Piston Limited, current cost of capital is 10%.

 - The French inflation is expected to be below the South African inflation by 1% per year, throughout the life of this investment 

- The current exchange spot rate is R23.50 to the Euro (€). 

Compute the necessary calculations and advise Piston Traders Limited if it is worth investing in neither, in one or both of these two opportunities.

All answers must be typed up and workings must be shown

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 14 440 000 7 700 000 102 000 000 24 050 000 1 150 000 2 220 000 1 100 000 Euro 21 000 000 4 000 000 32 000 000 15 000 000 9 000 000 800 000