(d) Wakalinga Co. Ltd must choose between two types of transformers, A and B. Data for these are listed in Table 1. The

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D Wakalinga Co Ltd Must Choose Between Two Types Of Transformers A And B Data For These Are Listed In Table 1 The 1 (57.07 KiB) Viewed 22 times

(d) Wakalinga Co. Ltd must choose between two types of transformers, A and B. Data for these are listed in Table 1. The price of electricity is set to 0.40 Tsh/kWh, and the discount rate is set to 5% per year [13 Marks] Price (million Tsh) Lifetime (years) Scrap value (Tsh) Idle loss (MWh/year) Operating loss (MWh/year) Type B 3.1 2.5 40 40 0 0 300 450 1,400 1,100 Type A (1) Which of the two types would you recommend that Wakalinga acquire? (ii) What value should the discount rate be for the two investments to be equally attractive? (ii) Sketch graphs of the net present value, NPV, of the two investments as a function of the discount rate, i. Can the answer to question 2 be found, based on the two graphs? Assume that from the answer to question 1, proposes to choose type B. It is possible for this type to add a short-circuit test for 0.6 million Tsh, which will increase the life by 10%, i.e. from 40 to 44 years. (iv) Would you recommend that Wakalinga acquire the short-circuit test?