DD Limited, South Africa, is a specialist manufacturer of electronic scooters. In seeking to expand...
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DD Limited, South Africa, is a specialist manufacturer of electronic scooters. In seeking to expand its operations, it could acquire a French subsidiary company, AAA Limited, or set up a new division in its home market. The relevant figures for these two options are: Set up new division at home Rand Cost of setting up premises Cost of machinery Annual sales Annual variable cost Additional head office expenses Existing head office expenses Depreciation: machinery on cost annually Acquisition Euro Acquire shares from existing shareholders Redundancy costs Annual Sales Annual variable costs Annual fixed costs Consultants fees Additional information: The project is expected to last for years. DD Limited, current cost of capital is The French inflation is expected to be below the South African inflation by per year, throughout the life of this investment. The current exchange spot rate is R to the Euro Required: Compute the necessary calculations and advise DD Traders Limited if it is worth investing in neither, in one or both of these two opportunities.
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