Answer Question 3.1 and 3.2

QUESTION 3 (15 marks) Kilowatt (Pty.) Ltd. ("Kilowatt") is a producer of renewable energy. Kilowatt has various plants nationwide which include: wind power plants in the Eastern Cape, hydro-power plants in KwaZulu-Natal and biogas plants in the Western Cape and Free State to which farmers can sell their agricultural waste. The latest operational addition that Kilowatt is keen to make, is establishing solar power plants in the Northern Cape. Solar power holds the most potential of the renewable energy sources in the South African context given the country's geographic location. To fund this project, Kilowatt will allocate an equal sum of money annually, which has been generated through the entity's other energy sources, to save for the solar power plant. This allocated amount will be paid over an external investment annually. The external investment is the erection of office buildings by an external party which requires funding. The cash flow amounts required for these buildings are of smaller values than the cash flows required by Kilowatt to establish the solar plant. Kilowatt, therefore, decided to pay the allocated amount of Kilowatt's generated profits over to the external party to fund their project. Kilowatt will do this over a period of 12 quarters. In return, the external party will remunerate Kilowatt by repaying them at the end of that period of time subject to an 11.9% per annum, quarterly compounding interest rate. At that point in time, Kilowatt will then take that repayment and utilise it to establish Kilowatt's solar power plant. The amount which Kilowatt will require at that point is R63 000000. REQUIRED: 3.1. Calculate the annual equal amount which Kilowatt (Pty.) Ltd. must pay over to the external investment in the savings effort for Kilowatt's solar power plant. (8 marks) 3.2. Assume that the scenario stated that the interest rate is 11.9% per annum, annually compounding and that the equal payments would be quarterly paid over to the external investment. Taking the above into account, calculate the value of the payments that Kilowatt (Pty) Ltd. would have had to make to the external investment. ( 7 marks)