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
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
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