Project Details: Developing a DS0 swithcing module, over the existing SDH equipment.

Currently the customer deploys additonal DS0 crossconnect equipment at International PoP locations where aggr This development will provide them DS0 switching functionaliy over existing SDH equipments

Project Benefits: This would increase the sales of DS0 module($2200 each) on existing SDH equipment We are expecting the module requirement to 100 modules during the first year, and further decreasing by 20% ev Also it would expectedly increase the sale by 5% of the existing product. The existing price of the product is $7600

Expected gains Direct Additonal module equipment sales sales Total Benefit Year 0 0 266000 1 220000 486000 266000 2 176000 442000 266000 3 140800 406800 266000 4 114400 380400 266000 5 90200 356200 The calculation is shown in a simplified form, not including price fall to be achieved every year, as well as the incre

Cost of the Project: During the intial period, this feature would require R&D cost and testing cost. R&D Cost consist of hardware as we Product verification and testing cost would be recurring cost as this feature needs to be tested over future softwa Also, Intial testing cost would include intial customer demo and field trial cost Expenses Support PV team qualification training cost cost 150000 8000 50000 50000 50000 50000 50000

Year 0 1 2 3 4 5

R& D Expenses 500000

Total Expense 650000 50000 50000 50000 50000 50000

Project Implementation Period 1 year period required for customer shipment readiness(Includes development period, demo and field trial) Financing of the project 75% of the financing of the project would be on retained earning, and 25% on the bank debt

Bank Interest rate 13% Since the company is not listed, the cost of retianed earning has been fixed to bank rate of 8%, plus 12% due ot hi Cost of Retained Earning 20% Applicable Income tax rate 40% Cost of Debt Expected cost of retianed earning 13% 20% Mix= Mix= 25% 75%

Hence, WACC

17%
r 1+r 17% 117%

Year 0 1 2 3 4 5

Cash Flow -650000 436000 392000 356800 330400 306200

Cumulative Cash Flow -650000 -214000 178000 534800 865200 1171400

PV Factor 1.0 0.85 0.73 0.62 0.53 0.46

DCF -650000 372649.6 286361.3 222775.4 176318 139661.2

Cumulative DCF

-650000 -277350 9011 231786 408104 547766

IRR

53%

NPV 1.5 years

547766 $

Payback period= Discounted pay back period

1.97 years

Here, IRR > Discounting Rate (WACC).Hence, Project approved. Here, NPV is showing Positive, meaning Project Beneficial.

al PoP locations where aggregation of DS0 is to be carried out.

urther decreasing by 20% every year rice of the product is $7600 and has net sales of 700 units/year

ery year, as well as the increased sales expected every year

st consist of hardware as well as software development cost e tested over future software releases(2 per year) during the product life cycle

, demo and field trial)

e of 8%, plus 12% due ot high risk of peoject