Queen, one of the directors of Queen Ltd$.("$Queen$"),$ worked in the clothing industry in the USA for a period of $10$ years and has built strong relations with some of the large international fashion outlets. During her recent visit to the US$,$ she met one of the directors, Mr$.$ James of a large international fashion outlet "James". During their meeting, both directors are of the opinion that it will be a good idea for James to retail clothing through a South African outlet for a period of $5$ years as this will give them an indication of whether it will be feasible to subsequently open James's outlets in South Africa. Queen saw this as an opportunity and suggested that James consider retailing his clothing line in Queen's stores since Queen has years of experience as a clothing retailer and is quite in tune with the South African market.

Queen and James agreed in principle to the arrangement as per the contract below:

Q & J PRINCIPAL AGREEMENT

Queen will pay James a once of initiation fee of $$15$ Million for an exclusive right to sell James's clothing line. Queen expects to pay this amount after the first year of sales.

Research conducted to the value of R$1$ Million indicated that the sales of James clothing will amount to R$500$ Million in $2024$ and is expected to increase by $7\%$ annually thereafter for the remainder of the period.

James's clothing line purchases by Queen will amount to R$255$ Million in $2024$ and will escalate by $5\%$ annually thereafter.

Queen will have to incur all costs related to marketing and refurbishment of stores to create a market for James in South Africa.

A once$-$off marketing costs and store refurbishment to the value of R$25$ Million and R$100$ Million, respectively, will need to be incurred by Queen upfront.

Queen is expected to incur costs related to print media to the value of R$75000$ per month to be paid in arrears.

HPFM$440-1-$Jan$-$Jun$2024-$SuppSA$1-$LM$-$V$2-12062024$

Queen is expected to incur costs related to the broadcast of $100$ television advertisements per year, with each advertisement worth R$50000,$

The above repeat costs are expected to increase by an inflation rate of circa $6\%$ per year thereafter.

Working capital requirements are expected to amount to $12\%$ of sales per year and are incurred at the beginning of each year.

The once$-$off refurbishment costs will qualify for improvements and will be depreciated over $5$ years. SARS will permit a $3-$year allowance on the store license. The TV ads and printing media will receive a full deduction. The marginal tax rate is $27\%.$

The tax department provided you with the tax framework to calculate the taxable amount:

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