QUESTION FOUR (25 Marks) Mamma Limited, South Africa, is a specialist manufacturer of electronic scooters. In seeking to expand its operations, it could acquire a French subsidiary company, Lux Limited, or set up a new division in its home market. Rand 8 440 000 The relevant figures for these two options are: Set up a new division at home Cost of setting up premises Cost of machinery Annual sales 7700 000 52 000 000 14 000 000 750 000 Annual variable cost Additional head office expenses Existing head office expenses Depreciation: machinery 10% on cost annually 1 005 000 770 000 Euro 5 000 000 Acquisition Acquire shares from existing shareholders Redundancy costs Annual Sales 800 000 11 000 000 3 000 000 Annual variable costs 2 000 000 Annual fixed costs Consultants fees 600 000 Additional information: . + . The project is expected to last for 5 years. Mamma Limited, the current cost of capital is 11%. The French inflation 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 R21.82 to the Euro (). . Required: Compute the necessary calculations and advise Mamma Traders Limited if it is worth investing in neither, in one or both of these two opportunities. (25 marks)