vb.net barcode generator Determining NPV when leasing in Software

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Table 11-10 Determining NPV when leasing
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Class 4 NPV ($2,889,246 $3,190,076 $982,038)(1.6901)
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Softswitch NPV ($3,038,246 $1,032,697)(1.6901)
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$3,389,578
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Table 11-11 Net present value when leasing at 12%, 10%, and 7% OCC for leasing 480 DS0s
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Class 4 $3,190,076 where N $3,275,768 where N $3,412,613 where N 2, OCC 2, OCC 2, OCC 12 10 7
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Softswitch $3,389,578 where N $3,480,630 where N $3,626,032 where N 2, OCC 2, OCC 2, OCC 12 10 7
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Softswitch Economics
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Table 11-12 Total costs and benefits when purchasing Class 4 or softswitch for 480 DS0s
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Income tax component Gross income Business expenses Taxable income before depreciation and/or capital gains Depreciation Salvage value at year two Book value at year two Difference salvage value versus book value Class 4 $3,511,296 $561,600 $2,949,696
11
Softswitch $3,511,296 $444,000 $3,038,246
$496,236 $278,193 $210,540 $67,653 taxable as capital gains at 20% $13,530 $13,530 $113,900 34% in excess of over $335,000 $113,900 ($2,949,696 335,900) (.34) $1,002,590 capital gains $13,530 $1,016,120
$155,560 $94,755 $44,440 $50,315 taxable as capital gains at 20% $10,063 $10,063 $113,900 34% in excess over $335,000 $113,900 ($3,038,246 335,900)(.34) $1,032,698 capital gains at $10,063 $1,042,760 $1,995,485
Tax on capital gains Income tax as figured from federal income tax rates for corporation, 1994, instructions for forms 1120 and 1120-A
Profit after taxes and expenses
$1,933,575
Table 11-13 Salvage values for 480 Class 4 and softswitch DS0s
Salvage value class 4 (P-S)(A/P, I, N) ($550,000 $100,000)(.5917) $278,265
Salvage value softswitch ($200,000 $50,000)(.5917) $50,000(.12) $94,755
$100,000(.12)
Table 11-14 lists the net present values when purchasing 480 DS0s. Note in Table 11-12 the approximately 17 percent greater value of softswitch over Class 4 in net present value. Tables 11-11 and 11-14 detail the sensitivity analysis for differences in the OCC of the Class 4 versus softswitch project. In each instance, softswitch still has a more positive value than Class 4, which determines that softswitch is the better value in this analysis.
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Softswitch Economics
Softswitch Economics
Table 11-14 Net present value when purchasing 480 DS0s
Softswitch NPV with OCC at 12%, 1 0%, and 7% $638,000 NPV ($1,995,485)(1.6901) $3,172,569 NPV ($1,995,485)(1.7355) $3,263,164 PV ($1,995,485)(1.8080) N $3,407,836 $200,000
Class 4 NPV with OCC at 12%, 10%, and 7% NPV ($1,933,575)(1.6901) $2,631,675 NPV ($1,933,575)(1.7355) $2,717,719 NPV ($1,933,575)(1.8080) $2,857903
$638,000
$200,000
$638,000
$200,000
Table 11-15 provides depreciation information on Class 4 and softswitch for a two-year project. Table 11-16 compares acquisition costs for used Class 4 versus new softswitch. Table 11-17 shows the total benefits and cost when leasing used Class 4 versus softswitch. In Table 11-18, Softswitch delivers a slightly higher value at this scale. Table 11-19 illustrates income tax implications with depreciation and the salvage value for used Class 4 and softswitch. The net present value when purchasing used Class 4 and new softswitch is shown in Table 11-20. Note that when buying a used Class 4 at $100,000 or half the purchase price of a softswitch solution, Class 4 offers only a slightly higher net pre-
Table 11-15
Depreciation of Class 4 (GDS method) Depreciation of softswitch (GDS method) over 2 years $200,000(.3333) $155,560 $200,000(.4445)
Depreciation on Class 4 and softswitch for a two-year project
over 2 years (Year 1 550,000(.3333) $427,790
Year 2)
$550,000(.4445)
Table 11-16 A comparison of acquisition costs for used Class 4 versus new softswitch
Components of Cost System Installation Total (P Co)
Used DMS-250 $100,000 $7,500 $107,500
Softswitch NuTANDEM $200,000 $7,500 $207,500
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Softswitch Economics
Table 11-17 Total benefits and cost when leasing used Class 4 versus softswitch
Income tax component Gross income Business expenses (includes leasing costs) Taxable income Income tax as figured from federal income tax rates for corporation, 1994, instruction for forms 1120 and 1120-A Class 4 $3,511,296 $622,050
11
Softswitch $3,511,296 $473,050
$2,889,246 $113,900 34% in excess over $335,000 $113,900 ($2,889,246 335,900) (.34) $982,343
$3,038,246 $113,900 34% in excess over $335,000 $113,900 ($3,038,246 335,900)(.34) $1,032,697
Profit after taxes and expenses
$1,906,903
$2,005,549
Table 11-18 Net present value when leasing used Class 4 and new softswitch.
Class 4 NPV NPV NPV ($1,906,903)(1.6901) (1,906,903)(1,7355) ($1,906,903)(1.8080) $3,222,856 $3,309,430 $3,447,680
Softswitch NPV NPV NPV ($2,005,549)(1.6901) ($2,005,5490(1.7355) ($2,005,549)(1.8080) $3,389,578 $3,480,302 $3,626,032
Table 11-19 Income tax implications with depreciation and salvage value for used Class 4 and softswitch
Income tax component Gross income Business expenses Taxable income before depreciation and/or capital gains Depreciation Salvage value Book value Difference salvage value vs. book value Taxable on capital gains
Class 4 $3,511,296 $544,000 $2,967,296
Softswitch $3,511,296 $444,000 $3,038,246
$77780 $54,453 $22,220 $32,233 taxable at 20% capital gains $6,446
$155,560 $94,755 $44,440 $50,315 taxable at 20%
$10,063
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