ط Pretend your company won a license to build a U.S. cellular system (the application cost for thelicense was only $500!). Your license is to cover 140 square km. ASsume a base station costs$500,000 and a MTSO costs $1,500,000. An extra $500,000 is needed to advertise and start thebusiness. You have convinced the bank to loan you $6 million, with the idea that in four years youwill have earned S10 million in gross billing revenues, and will have paid off the loan.(a) How many base stations (i.e., cell sites) will you be able to install for $6 million?(b) Assuming the earth is flat and subscribers are uniformly distributed on the ground, whatassumption can you make about the coverage area of each of your cell sites? What is the majorradius of each of your cells, assuming a hexagonal mosaic?(c) Assume that the average customer will pay $50 per month over a four-year period. Assume thaton the first day you turn your system on, you have a certain number of customers which remainsfixed throughout the year. On the first day of each new year, the number of customers using yoursystem doubles and then remains fixed for the rest of that year. What is the minimum number ofcustomers you must have on the first day of service in order to have earned $10 million in grossbilling revenues by the end of the 4th year of operation?(d) For your answer in (c), how many users per square km are needed on the first day of servicein order to reach the $10 million mark after the 4th year?

Answered: da MT 1 have ned $L

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 9E: Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required:...

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Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?
Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?
Talbot Industries is considering launching a new product. The new manufacturing equipment will cost 17 million, and production and sales will require an initial 5 million investment in net operating working capital. The companys tax rate is 40%. a. What is the initial investment outlay? b. The company spent and expensed 150,000 on research related to the new product last year. Would this change your answer? Explain. c. Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for 1.5 million after taxes and real estate commissions. How would this affect your answer?
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