Pegasus Telecommunications Ltd (PTL) is considering rolling out a new cable Internet service. PTL is a taxable, publicly
Posted: Mon May 30, 2022 8:40 am
Pegasus Telecommunications Ltd (PTL) is considering rolling out
a new cable Internet service. PTL is a taxable, publicly listed
corporation operating in Australia. PTL’s management is in the
process of analysing the project using the net present value
method, and as a junior analyst you have been asked to gather the
relevant information. For each of the following items explain
briefly (no more than 1 sentence) why that item is or is not
relevant to the NPV computation: a. Last month the marketing
department ran a focus group to determine consumer interest in the
new service. An invoice for $2,500 has just arrived from the
consultants involved in running the focus group. b. PTL
headquarters allocates central company costs to departments at a
rate of $5,000 per employee per year. c. PTL’s bank will charge an
interest rate of 12% p.a. compounded monthly on the loan required
to purchase the necessary hardware. d. Equipment purchased will be
depreciated straight line over 5 years. e. The project will require
the use of warehouse space already owned by PTL. The company
estimates that the warehouse is worth $450,000
show reasoning
a new cable Internet service. PTL is a taxable, publicly listed
corporation operating in Australia. PTL’s management is in the
process of analysing the project using the net present value
method, and as a junior analyst you have been asked to gather the
relevant information. For each of the following items explain
briefly (no more than 1 sentence) why that item is or is not
relevant to the NPV computation: a. Last month the marketing
department ran a focus group to determine consumer interest in the
new service. An invoice for $2,500 has just arrived from the
consultants involved in running the focus group. b. PTL
headquarters allocates central company costs to departments at a
rate of $5,000 per employee per year. c. PTL’s bank will charge an
interest rate of 12% p.a. compounded monthly on the loan required
to purchase the necessary hardware. d. Equipment purchased will be
depreciated straight line over 5 years. e. The project will require
the use of warehouse space already owned by PTL. The company
estimates that the warehouse is worth $450,000
show reasoning