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Transcription of this question: Las Rosas (LR)Las Rosas (LR) is a large commercial dairy farm owned and managed by the D’Aremberg familysince 1986. It has 3800 cows. LR sells milk, cheese and yoghurts. In 1996, LR started to export someOf its dairy products. Profits and cash flow have been improving year on year. LR has no outstandingloans and therefore its current gearing ratio is zero.I-RS unique selling proposition (IJSP) comes from the organic quality Of its products as they aremade without chemical additives. The cows’ diet does not include hormones and Other supplements.The farm ‘s products also meet national and international quality standards.I-RS corporate culture encourages innovation and the use Of cell production. TO stay ahead Of thecompetition LR has increased its spending on research and development (R&D) and workers aregiven the opportunity to create new products, or to add value to existing ones. LR financial manager,however, believes that the R&D budget is too high and needs to be cut. He also argues that there aretoo many legal constraints limiting the development Of new products.I-RS management is considering buying El Remanzo, a large sheep farm located nearby. Thisacquisition will cost $24 million and LR will need to cut its R&D budget to zero and organize anew loan to finance the takeover. A significant restructuring would need to occur at both LR andEl Remanzo to allow both companies to combine resources and knowledge. However, the potentialeconomies Of scale experienced by LR could be substantial.Total capital employed at LR is $45 million.Total capital employed at LR is $45 million.Year234Expected netcash flows291217[Source: C International Baccalaureate Organization 2013](Question I continued)(a)(b)(c)(d)(e)Describe two benefits for LR Of using cell production.Explain two benefits for LR Of meeting quality standards.Calculate the following for LR (show all your working):(i) the payback period.(ii) the average rate of return (ARR)_(iii) the net present value (NPV) using a discount rate Of 8 0/0.(iv) the gearing ratio if the acquisition Of El Remanzo by LR is financed bya loan.Comment on your results to parts andAnalyse two costs to LR resulting from the acquisition Of El Remanzo.[4 marks][4 marks][2 marks][2 marks][2 marks][2 marks][3 marks][6 marks]

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