## 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

(\$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)...

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