AF325 Case 1 QI. Summary of the Ocean Carriers Ocean Carriers was evaluation a proposed lease of a ship for a three-year period, beginning in early 2003. However, No ship in Ocean Carrier’s current fleet met the customer’s requirements. This summary will show the Linn (the company’s vice- president) whether decide to Ocean Carries should commission a new carrier and could be leased to the customer.
According to the Ocean Carriers’ 6 Exhibit using in lease for a ship, it help Linn make the final decision which future market conditions warranted the considerable investment in a new ship. Because the cost of New Vessel is $33,738,397 at 9% and $35347134. 21 at 6%, we choose the first one due to the cost of New Vessel is cheaper than the second. Based on my case analysis question 5 and 6, we can get the NPV at Tax rate is 35% is 10560239. 76 and the NPV at Tax rate is O is 26066775.
Therefore the company has a big net present value of nvestment when the NPV after tax rate at 35%. In this situation, Linn can make a right decision clearly help she’s company solving this problem. Q2. Decision to be made. The NPV at tax rate 10560239. 76 and NPV at tax rate O 26066775, so we will choose the first one. Although the two NPV also are positive net present value of the investment in tax rate 35% and O, the first NPV is bigger than the second. Q3: Determine the cost of New Vessel The cost of New Vessel is $33,738,397. at 9%, and the cost of New Vessel is 35347134. 21 at 6%. so we choose the cost of New vessel $33,738397. 44 at 9%. Q4) Important Cash Flows Items Line Item Revenue ??”Daily Hire x Days Hired Operating Expenses ??”Daily Operating Cost x 365 Depreciation Capital Expenditures Change in Net Working Capital = Initially, grows at inflation rate After-tax Proceeds from Sale of Equipment Hint: Scrap value of Vessel is $5 million after 15 years. Assume that Scrap value increases by inflation rate after then