QUESTION $1(38$ marks$)$

Held Ltd $($Help$)$ is a large South African private hospital group with hospitals nationwide. The entity has a $31$ August financial yearend.

Given the nature of Help$$s business activities, the entity is capital intensive as it requires a large sum of fixed assets, such as hospital buildings, medical machinery and other medical equipment to conduct its business.

Property, Plant and Equipment

After a recent review of the business, it has been brought to the directors$$ attention that some of the medical equipment will reach the end of their useful life in $3$ years$$ time from today. In order to replace them, new equipment to the value of R$850000$ will have to be purchased at that point in time.

To have sufficient funds available, the directors have decided to start paying amounts $($of a varying values$)$ each six months in advance into a bank account. After conducting an evaluation of the cash flow budget, the directors agreed that R$72300$ will be paid as the first payment, in the first year of the bank account. The bank account has been opened this year, and thus, a payment will be required for this year. The value of each payment made by Help will be increased by $7\mathrm{.}4\%$ from the value of the previous payment made.

Should Help not be able to accumulate enough funds at the end of the $3$ years from the payments described above, the entity will make one lumpsum payment into the same bank account at the end of the second year to ensure that the required amount will be available at the end of the $3$ years. This lumpsum payment will be additional to the payment that will be made into the account in that period, as described in the above paragraph.

The bank account offers an interest rate of $8\mathrm{.}6\%$ annually compounding.

The bank account will pay out the total accumulated funds to Help at the end of the $3$ years.

ANNEXURE F: FORMATIVE ASSESSMENT $1$

$60$ HFMN$230-1\_$Jul$-$Dec$2024\_$FA$1\_$V$3\_$ES$\_03072024$

Assume today is $1$ September $2024.$

Investment Opportunity

An investment opportunity has been made available to Help. According to the terms of the investments, Help may purchase the investment for R$125000,$ payable upon acquisition of the investment. Once purchased, the investment will generate interest for two $(2)$ years. During these two $(2)$ years, no payment will be made to Help. Thereafter, four $(4)$ R$38000$ annual payments will be made to Help, payable in advance. Once these four $(4)$ payments have been made to Help, it will be deemed that all balances have been settled between the two parties, and no amount is due further. The investment offers a return of $7\mathrm{.}6\%$ monthly compounding.

Assume that Help will acquire this investment today.

General Maintenance

In a few years, Help will need to perform general maintenance activities on their hospital's buildings. It is estimated that this general maintenance will cost R$230000$ in total. To ensure sufficient funds are available, Help wishes to put money aside from the profits made. A savings account will be opened which offers a return of $8\mathrm{.}1\%$ bi$-$monthly compounding, into which R$17785$ bi$-$monthly payments will be made.

Assume that the savings account will be opened today to start making payments into it$.$

REQUIRED:

$1\mathrm{.}1.$ Refer to the Property, Plant and Equipment. Calculate whether Help Ltd will be required to make a lumpsum payment into the savings account. If so$,$ advice Help Ltd of the value of the lumpsum payment that should be made at the end of the second year.

Round all amounts to two decimals.