Question
This question relates to the Telstra Payphone case, available from the MyABS page for Topic 6. If the digital advertising would generate $3,000 per unit
This question relates to the Telstra Payphone case, available from the MyABS page for Topic 6. If the digital advertising would generate $3,000 per unit per month (rather than $6,000), what would the NPV be? Assume the following financial estimates are ascertained:
Cost per payphone is $220,000 (includes all hardware, install, testing etc)
120 payphones to be installed in Sydney
Discount rate to be used is 6%
Lifetime of the payphone is 5 years
Salvage value per payphone at the end of the 5 years is $30,000
Each payphone is expected to provide Advertising revenue cash flows of $6,000 per unit per month
Each payphone is expected to generate Call revenue of $1,000 per month
The rollout and ongoing management requires a dedicated project director , an a salary of $130,000 pa
It is estimated that the Servicing and repair costs across all payphones will be $30,000 per month
The Cost of producing the digital ads is 20% of the estimated revenue
Ignore tax
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