Question
Pegasus Telecommunications Ltd (PTL) is considering rolling out a new cable Internet service, PTL is a taxable publicly listed corporation operating in Australia. PTLs management
Pegasus Telecommunications Ltd (PTL) is considering rolling out a new cable Internet service, PTL is a taxable publicly listed corporation operating in Australia. PTLs management is in the process of analyzing the project using the NPV 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 allocate central company costs to departments at a rate of $5,000 per employee per year.
c. PTLs bank will charge an interest 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.
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