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Net Present Value Decisions in the Telecommunications Service

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Net Present Value Decisions in the Service Industry

A telecommunications company with a discount rate of 8% is considering two investments.
Voice Service Data Service
Initial cost $(50,000) $(100,000)
Year 1 20,000 50,000
Year 2 20,000 50,000
Year 3 20,000 50,000

Required
A. Calculate the NPV for both services.
B. If the phone company can only provide one service currently, which project should it
choose?
C. If this is a regulated service industry, explain why the phone company may have to invest
in the voice service.

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Solution Summary

This solution shows step-by-step calculations to determine the Net Present Value of both voice and data services. It also provides an investment analysis on the phone company and regulated service industry.

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