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Syringer Limited is an American based manufacturer of the latest electronic automobile devices. The company is currently investigating two projects for expansion. It can only undertake one of these projects and has asked your advice in deciding which one to proceed with. Project 1 Production at the existing factory could be increased. The cost of the new machinery for this option would be an initial outlay of $55 million. This would result in an additional $1.8 million profit being earned in each of the 10 years that the project would last. The plant will be fully depreciated over the 10 years, on a straight-line basis and existing overheads amounts to $150 000 per annum. These expenses were included in the profit calculations. Project 2 Production could be increased by purchasing a new manufacturing facility in South Africa. The cost of the facility would be an initial cash outlay of R18.5 million. This would result in annual sales of R9.2 million. Annual fixed and variable costs are R1.2 million and R3.6 million respectively. The fixed costs do not include depreciation expenses. Consultants' fees amount to R900 000. Additional information: Syringer Limited's cost of capital is currently at 8%. The South African inflation is expected to exceed the American inflation by 1% throughout the life of these projects. The current exchange rate is R8 to the dollar. Required: 2.1 Advise Syringer Limited which project they should undertake, showing your calculations and assumptions to support your advice 2.2 If the expected cost of the facility in project 2 is R16 million, would this change your decision? Explain Syringer Limited is an American based manufacturer of the latest electronic automobile devices. The company is currently investigating two projects for expansion. It can only undertake one of these projects and has asked your advice in deciding which one to proceed with. Project 1 Production at the existing factory could be increased. The cost of the new machinery for this option would be an initial outlay of $55 million. This would result in an additional $1.8 million profit being earned in each of the 10 years that the project would last. The plant will be fully depreciated over the 10 years, on a straight-line basis and existing overheads amounts to $150 000 per annum. These expenses were included in the profit calculations. Project 2 Production could be increased by purchasing a new manufacturing facility in South Africa. The cost of the facility would be an initial cash outlay of R18.5 million. This would result in annual sales of R9.2 million. Annual fixed and variable costs are R1.2 million and R3.6 million respectively. The fixed costs do not include depreciation expenses. Consultants' fees amount to R900 000. Additional information: Syringer Limited's cost of capital is currently at 8%. The South African inflation is expected to exceed the American inflation by 1% throughout the life of these projects. The current exchange rate is R8 to the dollar. Required: 2.1 Advise Syringer Limited which project they should undertake, showing your calculations and assumptions to support your advice 2.2 If the expected cost of the facility in project 2 is R16 million, would this change your decision? Explain