QUESTION 2 (25 Marks) Batman Traders Limited is a South African based manufacturer of Generators, an award-winning generator. The company is currently investigating two investment projects. The information is given below: Project A Involves extending the company's production facility in Gauteng. The plant will cost R850 000 and is expected to create an additional annual profit of R120 000 for the 5 years life of the project. The following expenses were included in the annual profit: - Depreciation was calculated on the straight-line method, over the life of project. - Share of existing overheads, bome by head office amounting to R50 000p.a. - Additional fixed cost of R45 000. Project B Involves setting up an independent manufacturing facility in Taiwan. The cost of the facility would be an initial outlay 2 800000 Taiwan dollars. This would result in: - annual profit of 500000 Taiwan dollars, for the 5 years of the project. - The annual fixed costs and variable costs are 90000 and 80000 Taiwan dollars respectively. These costs were not included in the profit calculation. - Consultant fees of 40000 Taiwan dollars were included in the calculation of profit for Project B. Note: - Batman Traders Limited current cost of capital is 11%. - The Taiwanese inflation is expected to exceed the South African inflation by 2% p.a. throughout the life of the project. - The current spot rate exchange is 2.5 Taiwan dollars to the Rand. Required: Compute the necessary calculations and advise Batman Traders Limited if it is worth investing in neither, in one or both of these two opportunities. (25 marks)