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16-58 Pensacola Cablevision Company provides television cable service to two counties in the Florida pan-handle. The firm’s management is considering the construction of a new satellite dish in December of 20×0. The new antenna would improve reception and the service provided to customers. The dish antenna and associated equipment will cost \$200,000 to purchase and install. The company’s old equipment, which is fully depreciated, can be sold now for \$20,000.

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16-58 Pensacola Cablevision Company provides television cable service to two counties in the Florida pan-handle. The firm’s management is considering the construction of a new satellite dish in December of 20×0. The new antenna would improve reception and the service provided to customers. The dish antenna and associated equipment will cost \$200,000 to purchase and install. The company’s old equipment, which is fully depreciated, can be sold now for \$20,000. The company’s president expects the firm’s improved capabilities to result in additional revenue of \$80,000 per year during the dish’s useful life of seven years. The incremental operating expenses associated with the new equipment are projected to be \$10,000 per year. These incremental revenues and expenses are in real dollars. The new satellite dish will be depreciated under the MACRS depreciation schedule for the 5 year property class. The company’s tax rate is 40%. Pensacola Cablevision’s president expects the real rate of interest in the economy to remain stable at 10%. She expects the inflation rate, currently running at 20%, to remain unchanged. Compute the price index for each year from 20×1 through 20×7, using 1.000 as the index for 20×0. Prepare a schedule of after tax cash flows measured in real dollars. Compute the next present value of the proposed new satellite dish using cash flows measurd in real dollars. Use a real discount rate equal to the real interest rate. Note: Time 0 cash outflow; (188,000)??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????

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