Calculate the total estimated business interruption coverage amount based on the financial statements below. Show all your calculations.

2 of + A' Read aloud Draw Highlight V Erase a. Evaluate The objectives of mmmIsing ine CUSt OF TISK. (5 MValKS) b. Explain the components of the cost of risk. (12 Marks) Question 3 TARGET CASH AND CARRY (PTY) LTD (TARGET) [15 Marks] Target is a food, general and household goods retailer located in Eldoraigne, Centurion and has been in operation for 15 years. The business Target sells food, general and household goods and also operates a bakery and butchery in the shop. A small section of the premises is sub-let to a lock and key business. The financial manager indicated that Target is expecting annual growth of 8% per annum from 2017 after the upgrade of the kitchen and butchery. Target has a long-term lease agreement for the premises, which will expire at the end of 2030. The outlay of the shop can be compared with its competitors i.e. Spar, Checkers and Pick n Pay. Concerns and current insurance policy The store experienced significant business interruption events recently and approached the insurance broker to advice on updating the business interruption section of an existing policy. The CRO insisted on having the policy updated early in the new financial year, which will be on 1 January 2017. The MPL (Maximum Potential Loss) is assessed as the total loss resulting from a potential fire that destroys the entire premises/business The renewal date of the insurance policy coincides with the financial year. The Plant, Machinery, Stock and Contents are insured under a Fire Section, and the Business Interruption section follows the Fire section. Reinstatement can take up to 12 months, with business normalisation potentially another 6 months, so one should consider at least an 18-month indemnity period. Calculate the total estimated business interruption coverage amount based on the financial statements below. Show all your calculations. Audited financial statements The financial statements are presented below [TOTAL: 50 MARKS]TARGET CASH AND CARRY (PTY) LTD STATEMENT OF FINANCIAL POSITION AS AT 2016/12/31 Note(s) 2015/12/31 2016/12/31 Assets Non-Current Assets Properly, plant and equipment R 1 640 944 R 1 772 712 Loans to directors R 2 105 277 R 4 161 390 Deferred tax R 642 R 3 746 221 R 5 934 744 Current Assets Inventories R 3 663 872 R 3 116 766 Trade and other receivables R 1 321 089 R 743 082 Current tax receivable R 340 R 340 Cash and cash equivalents R 33 340 R 4 985 301 R 3 893 528 Total Assets R 8 731 522 R 9 828 272 Equity and Liabilities Share capital and reserves Share capital R 100 R 100 Retained Income R 909 891 R 916 948 R 909 991 R 917 048 Liabilities Non-Current Liabilities Other financial liabilities R 1 803 739 R 2 541 768 Deferred tax R 447 452 R 417 389 R 2 251 191 R 2 959 157 Current Liabilities Trade and other payables R 4 343 289 R 5 309 923 Other financial liabilities R 1 010 351 R 642 164 Bank overdraft R 206 700 R 5 560 340 R 5 952 087 Total Liabilities R 7 811 531 R 8 911 244 Total Equity and Liabilities R 8 721 522 R 9 828 292STATEMENT OF COMPREHENSIVE INCOME 12 MONTHS ENDED Note(s) 2015/12/31 2016/12/31 Revenue Sale of goods R 69 039 371 R 93 823 318 Cost of sales Purchases -R 57 740 986 -R 81 429 3 Gross profit R 11 298 385 R 12 393 959 Other Income Rental income R 14 010 R 7 089 Interest received R 3 767 R 9 756 Gains on disposal of assets R 131 042 R 148 819 R 16 845 Operating expenses Accounting fees R 89 867 R 83 448 Advertising R 19 587 R 40 017 Bad debts R 23 497 R 5 206 Bank charges R 624 043 R 711 698 Cleaning R 37 894 R 58 141 Computer expenses R 92 354 R 144 195 Consulting fees R 40 250 Depreciation, amortisation and impairments R 350 564 R 424 349 Donations R 28 399 R 40 130 Employee costs R 5 167 616 R 4 869 760 Electricity and water R 1 323 380 R 1 604 888 General expenses R 41 917 R 88 686 Insurance R 172 329 R 249 896 Lease rentals on operating lease R 922 435 R 1 146 742 Legal expenses R 40 981 R 40 250 Levies R 101 529 R 99 564 Motor vehicle expenses R 76 288 R 95 607 Petrol end oil R 84 802 R 134 097 Postage R 7 819 R 8 756 Printing and stationery R 17 497 R 21 581 Repairs and maintenance R 377 506 R 749 631 Royalties and license fees R 773 306 R 759 294 Security R 328 438 R 335 008 Staff welfare R 200 101 R 304 771 Telephone and fax R 55 110 R 78 844 Travel-local R 74 230 R 87 391 R 11 071 739 R 12 181 950 Operating profit R 375 465 R 228 854 Finance costs R 351 817 R 218 319 Profit before taxation R 23 648 R 10 535 Taxation R 30 705 -R 4 597 (Loss) profit for the year -R 7 057 R 5 938 Other comprehensive incomeSTATEMENTS OF CHANGES IN EQUITY Share capital Retained income Total equity Balance at 2014/01/01 100 R 911 010 R 911 110 Profit for the year R 5 938 R 5 938 Other comprehensive income Total comprehensive income for the year R 5 938 R 5 938 Balance at 2015/01/01 100 R 916 948 R 917 048 Loss for the year R 7 057 R 7 057 Other comprehensive income Total comprehensive loss for the year -R 7 057 -R 7 057 Balance at 2016/12/31 100 909 891 909 991 STATEMENT OF CASH FLOWS Note(s) 12 MONTHS ENDED 2015/12/31 2016/12/31 Cash flows from operating activities Cash receipts from customers R 69 183 758 R 94 167 962 Cash pald to suppliers and employees R 70 674 275 -R 93 924 428 Cash (used in) generated from operations -R 1 490 5 R 243 534 Interest income R 3 767 9,7513 Net cash from operating activities -R 1 486 750 253,290 Cash flows from investing activities Purchase of property, plant and equipment -R 331 250 -R 192 623 Sale of property, plant and equipment R 243 496 Loans to group companies repaid R 795 200 Sale of financial assets R 1 390 000 Net cash from investing activities -R 87 754 R 1 992 577 Cash flows from financing activities Net movement on financial liabilities -R 369 832 R 1 204 775 Repayment of members loan R 2 056 113 -R 3 940 661 Finance lease payments -R 351 817 -R 218 319 Net cash from financing activities R 1 334 464 R 2 954 205 Total cash movement for the year R 240 040 R 708 338 Cash at the beginning of the year R 33 340 R 741 678 Total cash at end of the year -R 206 700 R 33 340Net movement on financial liabilities -R 369 832 R 1 204 775 Repayment of members loan R 2 056 113 -R 3 940 661 Finance lease payments -R 351 817 -R 218 319 Net cash from financing activities R 1 334 464 R 2 954 205 Total cash movement for the year R 240 040 R 708 338 Cash at the beginning of the year R 33 340 R 741 678 Total cash at end of the year R 206 7 R 33 340 1. PROPERTY PLANT AND EQUIPMENT COST ACCUMULATED CARRYING VALUE ECIATION Leasehold property R 40 209 R 40 209 Plant and machinery R 3 617 666 -R 2 419 329 R 1 198 337 Furniture and fixes R 890 701 -R 520 473 R 370 228 Motor vehicles R 348 524 -R 184 586 R 163 938 R 1 772 712