The salvage value of the demonstration satellite when used as an initial element in a full-scale satellite is summarized in Figure 3.3 and discussed below. The salvage value, SV, is SV = PV1 + PV2- PV3- PV4 where PV1 is the present value of the full-scale satellite costs that may be foregone. PV1 accounts for the hardware costs for providing a capability equivalent to the demonstration satellite capability and the transportation costs associated with transporting this equivalent capability. The demonstration satellite capability must be adjusted for degradation effects which are a function of time (the time interval to the deployment of the first full-scale satellite) and both hardware and transportation costs must be adjusted for learning effects (assumed to be a function of time) that may also take place during this interim period. PV2 is the present value of consumer surplus benefits that will result if the marginal FIGURE 3.3 SALVAGE VALUE—GROWTH TO FULL-SCALE SATELLITE
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