Question 2 The management of a power generation company in Zambia is planning to invest K100m for five years for buying a Francis turbine to be used in the power station. The major challenges the company faces is cavitation which completely erodes and reduces performance of turbines of similar designs. The economic useful life of these turbines is expected to be ten years, but currently the turbines are replaced after five years. The engineers have just fitted a new turbine and the investment team has set aside the funds to replace the turbine with an anticipated turbine whose material will be strong enough to overcome cavitation. This turbine will be on the market five years after the fitting of the new turbine. The investment team have decided to purchase financial securities with maturity of five years and rate of interest of 35%. Advise management on the period of investment if the following periods of investments are available: interest to be compounded a) Annually b) Semi-annually c) Monthly d) Quarterly Note: Use a summary table to analyse your computations
Question 2
The management of a power generation company in Zambia is planning to invest K100m for five years for buying a Francis turbine to be used in the power station. The major challenges the company faces is cavitation which completely erodes and reduces performance of turbines of similar designs. The economic useful life of these turbines is expected to be ten years, but currently the turbines are replaced after five years. The engineers have just fitted a new turbine and the investment team has set aside the funds to replace the turbine with an anticipated turbine whose material will be strong enough to overcome cavitation. This turbine will be on the market five years after the fitting of the new turbine. The investment team have decided to purchase financial securities with maturity of five years and rate of interest of 35%.
Advise management on the period of investment if the following periods of investments are available: interest to be compounded
- a) Annually
- b) Semi-annually
- c) Monthly
- d) Quarterly
Note: Use a summary table to analyse your computations
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