TABLE OF CONTENTS 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.
| 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 |
| 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)... |
