Question 1
Partners Telecom (“PT”) is a company based in Windhoek that sells mobile broadband (also called
“data” in layman language) to individual customers. The company is considering selling the broadband
business to its management in an arrangement called a management buyout (MBO). The following information has been made available for the proposal:
At the beginning of 2022, the date on which the business will be sold to management, the
license to sell broadband will be having two years remaining. To acquire a license after it
expires, there should be a tender and the outcome is unknown.
The company will apply a differential rate system that charges different rates during peak and
off peak hours. Peak are hours are the hours between 9am and 5pm and will be charged
N$0.05 per minute in 2022. Off peak hours will be charged N$0.02 per minutes in the same
period. It is expected that in 2023 the charge will reduce by 10%.
The operating year will have 360 days. On average, consumption by customers will be 10
minutes per customer per day during peak hours and 25 minutes per day per customer during
off peak hours.
PT gets network from Namcom. Namcom will charge PT N$0.01 per minute during off peak
hours and increases it by 50% during peak hours in 2022. PT will pay 20% more for this service
in 2023.
Customer support will be provided by workers who will work in shifts. Four workers are required
per shift and there shall be 21 shifts in a week.
Each worker will have a 40 hour week i.e. 5 shifts made up of eight hours per shift. The
weekend shifts are shared equally among all the workers.
Given the nature of the shifts, full time workers who provide customer support will have 10
weeks of holiday in a year. These full time workers will be utilized for 50 weeks (i.e. 350 days)
per year. The balance of days will be worked by contract workers that are paid N$2 100 per
day.
Full time workers are each paid a basic wage of N$500 per week for 52 weeks in a year.
Weekend overtime shift is paid at a double at time. This remuneration has been agreed upon
with the labour union. According to the union agreement, wages will increase by 10%
beginning July 2023 and will remain at that level until the end of 2023.
Weekend is considered to be Saturday and Sunday. The weekend shall comprise six shifts
per worker in a year.
The maintenance of the website will require N$10 000 per month and will stay the same for
the next three years.
Administration costs will be N$4 500 per month in 2022 and will increase with N$1 500 per
month in 2023.
Research in to the operations of the business for the next two years has reviewed the following
customer patterns:
Year 2022 2023
Total customers 15 000 20 000
Customers peak times only 40% 45%
Customers non-peak times only 60% 55%
required to:
Calculate the Net present of the proposal using a cost of capital of 10%.
Note: The discount factor is calculated as [(1+r)-n] Where: r is the cost of capital in decimal form (0.1) and n is the time
period.
Question 1
Partners Telecom (“PT”) is a company based in Windhoek that sells mobile broadband (also called
“data” in layman language) to individual customers. The company is considering selling the broadband
business to its management in an arrangement called a management buyout (MBO). The following information has been made available for the proposal:
At the beginning of 2022, the date on which the business will be sold to management, the
license to sell broadband will be having two years remaining. To acquire a license after it
expires, there should be a tender and the outcome is unknown.
The company will apply a differential rate system that charges different rates during peak and
off peak hours. Peak are hours are the hours between 9am and 5pm and will be charged
N$0.05 per minute in 2022. Off peak hours will be charged N$0.02 per minutes in the same
period. It is expected that in 2023 the charge will reduce by 10%.
The operating year will have 360 days. On average, consumption by customers will be 10
minutes per customer per day during peak hours and 25 minutes per day per customer during
off peak hours.
PT gets network from Namcom. Namcom will charge PT N$0.01 per minute during off peak
hours and increases it by 50% during peak hours in 2022. PT will pay 20% more for this service
in 2023.
Customer support will be provided by workers who will work in shifts. Four workers are required
per shift and there shall be 21 shifts in a week.
Each worker will have a 40 hour week i.e. 5 shifts made up of eight hours per shift. The
weekend shifts are shared equally among all the workers.
Given the nature of the shifts, full time workers who provide customer support will have 10
weeks of holiday in a year. These full time workers will be utilized for 50 weeks (i.e. 350 days)
per year. The balance of days will be worked by contract workers that are paid N$2 100 per
day.
Full time workers are each paid a basic wage of N$500 per week for 52 weeks in a year.
Weekend overtime shift is paid at a double at time. This remuneration has been agreed upon
with the labour union. According to the union agreement, wages will increase by 10%
beginning July 2023 and will remain at that level until the end of 2023.
Weekend is considered to be Saturday and Sunday. The weekend shall comprise six shifts
per worker in a year.
The maintenance of the website will require N$10 000 per month and will stay the same for
the next three years.
Administration costs will be N$4 500 per month in 2022 and will increase with N$1 500 per
month in 2023.
Research in to the operations of the business for the next two years has reviewed the following
customer patterns:
Year 2022 2023
Total customers 15 000 20 000
Customers peak times only 40% 45%
Customers non-peak times only 60% 55%
required to:
Calculate the Net present of the proposal using a cost of capital of 10%.
Note: The discount factor is calculated as [(1+r)-n] Where: r is the cost of capital in decimal form (0.1) and n is the time
period.
