BOOK_CONTENT
From Softswitch: Architecture for VoIP

Net Present Value When Softswitch Generates Greater Revenue

According to Laura Thompson, Vice President of Marketing and Channels at softswitch vendor Sylantro (www.sylantro.com), a softswitch-enabled service provider could enjoy up to 25 percent greater revenue by virtue of offering high-margin calling features that a Class 4 or 5 service provider cannot offer. The following net present value model will determine if a higher net present value is achieved where the softswitch-enabled service provider is enjoying revenues greater than that of the Class-4-equipped service provider. Table 11-34 outlines the costs and benefits when softswitch generates 25 percent more revenue than Class 4, while Table 11-35 shows the NPV when softswitch generates 25 percent more revenue than Class 4.

Table 11-34: Costs and benefits when softswitch generates 25% more revenue than Class 4

Income tax component

Class 4

Softswitch

Gross income

$29,494,886

$36,868,608

Business expenses

($2,643,000)

($2,478,200)

Taxable income before depreciation and/or capital gains

$26,851,886

$34,390,408

Depreciation

($843,912)

($175,005)

Salvage value

$473,102

$189,976

Book value

$358,050

$74,250

Difference salvage value versus book value

($115,052)

($115,726)

Tax on capital gains (20% of above)

$23,010

$23,145

Income tax

$26,851,886(.35) = $9,398,160

$12,036,643

Profit after taxes and expenses

$17,453,726

$22,330,620

Table 11-35: NPV when softswitch generates 25% more revenue than Class 4

Class 4 NPV with OCC at 12%, 10%, and 7%

Softswitch NPV with OCC at 12%, 10%, and 7%

NPV = ($17,453,726)(1.6901) - $1,085,000 = $28,413,542

NPV = ($22,330,620)(1.6901) - $225,000 = $37,515,980

NPV = ($17,453,726)(1.7355) - $1,085,000 = $29,205,941

NPV = ($$22,330,620)(1.7355)...

Copyright The McGraw-Hill Companies, Inc. 2003 under license agreement with Books24x7

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