Pegasus Telecommunications Ltd (PTL) is considering rolling out a new cable Internet service, PTL is a taxable publicly listed corporation operating in Australia. PTL’s management is in the process of analyzing the project using the NPV method, and as a junior analyst you have been asked to gather the relevant information. For each of the following items explain briefly (no more than 1 sentence) why that item is or is not relevant to the NPV computation
A. PTL headquarters allocate central company costs to departments at a rate of $5,000 per employee per year
B. PTL’s bank will charge an interest of 12% p.a. compounded monthly on the loan required to purchase the necessary hardware
EXPERT ANSWER
