Sfundo Limited Sfundo Limited enters into a contract with Pro Tech Limited for the rental of a stall at the Midrand growth point hub. The commencement date of the lease is 1 January 2021 and the lease term is for five years. Sfundo Limited is permitted, subject to approval from Pro Tech Limited, to brand the stall and set up to suit their needs. Although the cost of branding is significant, The directors of Sfundo Limited decide to brand the stall as they are convinced this will bring in the business they require to be successful in the long term. The directors of Sfundo Limited believe that the location of the stall is strategic for business. The lease payments are R50 000 per year and are payable in arrears. The contract contains an option for Sfundo Limited to extend the contract for a further five years at the same rental, also payable in arrears. Commission and legal fees of R10 461 were incurred by Sfundo Limited and paid for in cash at the inception of the lease. A suitable interest rate at the inception of the lease is 10%. Similar stalls in similar malls currently attract rentals averaging R55 000 per year. Assuming the lease term is 5 years, Calculate the present value of the lease payments at the inception of the lease.
Sfundo Limited
Sfundo Limited enters into a contract with Pro Tech Limited for the rental of a stall at the Midrand growth point hub. The commencement date of the lease is 1 January 2021 and the lease term is for five years.
Sfundo Limited is permitted, subject to approval from Pro Tech Limited, to brand the stall and set up to suit their needs. Although the cost of branding is significant, The directors of Sfundo Limited decide to brand the stall as they are convinced this will bring in the business they require to be successful in the long term.
The directors of Sfundo Limited believe that the location of the stall is strategic for business. The lease payments are R50 000 per year and are payable in arrears.
The contract contains an option for Sfundo Limited to extend the contract for a further five years at the same rental, also payable in arrears.
Commission and legal fees of R10 461 were incurred by Sfundo Limited and paid for in cash at the inception of the lease.
A suitable interest rate at the inception of the lease is 10%.
Similar stalls in similar malls currently attract rentals averaging R55 000 per year.
Assuming the lease term is 5 years,
Calculate the present value of the lease payments at the inception of the lease.
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