TABLE OF CONTENTS This project entails the setup of a firm to provide telephone service at Neiva an intermediate city in Colombia, South America. This project will install 16,500 phone lines and 22,480 pairs of telephone lines in the distribution network to satisfy a part of the total demand. The feasibility study was based on detailed demand and market research and commercial quotes from specialized suppliers. [2]
The project was estimated for a 32-year period. The initial investment was made from 2000 to 2002. Hence, we consider the project as an ongoing concern and we value it at the end of 2003. The financial statements for 2003 have been considered as historical financial statements. In the appendix we present the relevant data and financial statements.
In Appendix A, we focus on a detailed estimation of demand, cost, and price. This estimation considers the demand as a function of the population s income level. It is a good demonstration of how today s technological tools can overcome shortcuts employed by people who continue to operate as if they were living in an age without inexpensive computing tools.
In this case we cannot use the traditional formulation for the WACC because, as we can see in the CB, taxes are not paid in the same year as they are accrued. Taxes are paid in advance. This means that the TSs are not earned in the same year that they are accrued. As discussed in Chapter Six, we...
