Calculate the current cost capital, Cost Accounting

The Zooline Company (Pty) Ltd is an American based company that focuses on the LSM 8 -10 markets. They do vehicle interiors, raise or lower suspensions and install top end sound systems and monitors in luxury vehicles.

The company is considering expanding its operations, and it has the opportunity to acquire a Mauritian based company, LUI , or set up a new division in American in another state.

Money symbols:  $ = Dollars  and MUR = Mauritian Rupee

The relevant details for these two options are:

Acquisition (LUI, Mauritius)             MUR

Redundancy costs                          22 000 000

Cost of license (annual Cost)              900 000

Annual sales                                   18 000 000

Consultants fees (per annum)           4 500 000

Annual variable costs                      12 000 000

Annual fixed costs                          1 500 000

Set-up division (American State)                             $

Cost of land and buildings                                         16 000 000

Cost of machinery                                                    13 800 000

Annual sales                                                            15 000 000

Annual variable costs                                                 7 600 000

Annual fixed costs                                                     3 800 000

Share of existing head office expenses                       1 400 000

Additional information:

-Zooline's current cost of capital is 10%

-The project is expected to have a life-span of 10 years

-The Mauritian cost of capital is expected to be 2 percentage points higher than in America throughout the life of these investments

-The current spot exchange rate is 1 $ = 3.6 MR.

- Ignore all taxes.

Required:

Make the necessary calculations for the two options and advise Zooline Company on which is the more lucrative of the projects purely from an investment point view. (Show all workings)

Posted Date: 3/29/2013 2:42:09 AM | Location : United States







Related Discussions:- Calculate the current cost capital, Assignment Help, Ask Question on Calculate the current cost capital, Get Answer, Expert's Help, Calculate the current cost capital Discussions

Write discussion on Calculate the current cost capital
Your posts are moderated
Related Questions
Are non-profit and governments required to depreciate assets? Why or why not? Would it make sense for them to use double declining balance? Is there a difference between a non-p

Cash is the other form of fund although in a narrow sense, this refers to a supply which can be drawn upon as per to the need. Here the term cash involves both cash and cash equiva

Example of Over and under absorption of production overhead costs By employing data from diagram assume such the production overhead absorption rate was computed where an acti

Q. What kinds of benefits have communities realized due to FCA? Communities have understood the following benefits by using FCA: • Rates or tipping fees are set right and fa

Two classes of stock authorized: $100 par preferred and $2 par common how do you record this transaction? May 18 Issues 30,000 additional shares of $2 common stock for $75 p

KIW Ltd currently orders Material B in batches of 2,500 kgs. Material B is consumed at a steady, known rate over the company's planning horizon of one year. The current usage is 40

Harriet Ltd is a trading company set up a number of years ago with 5,000 £1ordinary shares issued at par. In order to expand the production facilities it needs to raise a further £

Cube Manufacturing began two jobs during May 200X. The company had no beginning inventory. The following information is available:

Determine Profit in Long-Term To demonstrate the point about profit in the long-term, let us assume that a company sells and makes a single product.  There are no opening stoc

Explain and illustrate with your own example the operating cycle of a merchandiser.   Explain and  illustrate the differences between a multiple-step income statement and a single