TABLE OF CONTENTS The previous case studied the Net Present Value of leasing a Class 4 and softswitch. The following case studies purchasing these platforms. Leasing allows an operator to enter a market without the upfront cost of purchasing a switch. Another difference between leasing and purchasing a switch is that a switch that has been purchased as opposted to leased retains some salvage value.
Table 11-27 outlines the benefits and costs when purchasing Class 4 or softswitch for 4,032 DS0s. The net present value of Class 4 and softswitch when purchasing 4,032 DS0s is the subject of Table 11-28. As with Table 11-26, Table 11-28 reveals a 3 percent advantage of softswitch over Class 4 when purchasing both platforms. Table 11-29 illustrates the salvage value for Class 4 and softswitch for 4,032 DS0s.
| Income tax component | Class 4 | Softswitch |
|---|---|---|
| Gross income | $29,494,886 | $29,494,886 |
| Business expenses | ($2,643,000) | ($2,478,200) |
| Taxable income before depreciation and/or capital gains | $26,851,886 | $27,016,686 |
| Depreciation | ($843,912) | ($175,005) |
| Salvage value | $473,102 | $189,976 |
| Book value | $358,050 | $74,250 |
| Difference salvage value vs. 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 | $9,455,840 |
| Profit after taxes and expenses | $17,453,726 | $17,537,701 |
| Class 4 NPV with OCC at 12%, 10%, and 7% | Softswitch NPV with OCC at 12%, 0% and 7% |
|---|---|
| NPV... |
