Edwardson (Pty.) Ltd (Edwardson) is a manufacturing entity with a 31 March financial year-end. Edwardson's current machinery
Question:
Edwardson (Pty.) Ltd ("Edwardson") is a manufacturing entity with a 31 March financial year-end. Edwardson's current machinery is outdated and causes the production process to not be as effective as possible. Management has therefore reached the decision to sell the old machinery and replace it with a new manufacturing machine, machine XCP ("XCP"). The purchase price of XCP is R2 350 000. Edwardson does not have sufficient cash flow available to finance the full purchase price and, therefore, negotiated an instalment agreement with the supplier, Hardy Ltd ("Hardy"). The terms of the agreement state that Edwardson will make an initial deposit of R320 000 and the remaining amount due will be paid in equal quarterly instalments for 2 years, subject to interest which compounds quarterly. When converted, the effective interest rate is 11.84% per annum. Required: Draft an amortization schedule detailing Edwardson (Pty) Ltd.'s instalment agreement. Make use of the following format: Period Number Beginning Balance Instalment Amount Interest Amount Principle Amount End Balance Show all calculations. Round to two decimals, where required.
Corporate Finance and Investment decisions and strategies
ISBN: 978-1292064062
8th edition
Authors: Richard Pike, Bill Neale, Philip Linsley