QUESTION FOUR 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. 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 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 8 440 000 7 700 000 52 000 000 14 000 000 750 000 1 005 000 770 000 Euro 5 000 000 800 000 11 000 000 3 000 000 2 000 000 600 000 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.