Sethunya (Pty) Ltd manufactures handguns for the South African Defence Force from 1996 until 2018. Some Executive

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Question:

Sethunya (Pty) Ltd manufactures handguns for the South African Defence Force from 1996 until 2018. Some Executive Directors & top Government Officials are behind bars for theft and money filtering. The company was advised to clear its total liabilities before the official transfer of ownership to Mpotse-Ke-Obotse (Pty) Ltd, at a selling price of 2M, that includes; goodwill @ R 20 000 and transfer of ownership @ 10%. The company had the following outstanding accounts;

§ Debentures R 100 000

§ Long-tern loan R 55 000

§ Long-term bond R 45 000

Sethunya (Pty) Ltd company applied for a loan from Developing Bank of Southern Africa. Supposedly, the South African Reserve Bank Governor pronounced that both Prime rate and Repo rate will have slight margin at 0.08 and 0.10, chronologically, as a result of global crisis caused by Covid-19 epidemic. Both the parties reached a consensus for ten years on the deal.

Requirements:

1.1) How much cash is required by Sethunya (Pty) Ltd

1.2) Given the interest, how much is the present value interest factor

1.3) Given the interest, how much is the present value interest factor (PVIF) in monetary value?

HINT: CALCULATE THE VALUE OF LOAN on accounts long-term liabilities

1.4) Fill in the following amounts for year 1

a) Closing balance in year 1

b) Beginning principal in year 1

c) Actual loan payment (3)

d) Interest on year 1

e) Principal for year 1

f) Closing balance on year 1

1.5) Fill in the following amounts for year 5

a) Beginning principal in year 5

b) Interest on year 5

c) Principal for year 5

d) Closing balance on year 5

1.6) Fill in the following amounts for year 10

e) Beginning principal in year 10

f) Interest on year 10

g) Principal for year 10

h) Closing balance on year 10