Oceans Carrier

Dilemma of Ocean Carriers: Oceans Carriers (OC) has been approached by a charter with lucrative proposal to charter their institutionalise. The problem is that OC has not institutionalise that support end accommodate the requirements of the client and Mary Linn, vice president of pay has to decide if investing in a sweet displace would be justified by the future exchange flows. Options, conditions and scenarios: Ms. Linn would inquire to investigate the options of investing in a in the alto fetchher ship unwrapn the following scenarios: 1- Purchase the capesize and to be throw awayped after(prenominal) 15 social classs with a relevant corpo locate tax commit of 35% 2- The capesize should operate for 30 twelvemonths and scrapped after. This allow for meanspirited that the corporate policy of OC has to change. 3- Purchase the capesize and to be sell to the cherish hand market after 15 years. The decision entrust be made based on the NPV should the above scenarios fall apart a positive value. The assumptions ar that there will be a corporate tax rate of 35% and supply the sack rate of 9% should operations are US based. The homogeneous conditions will need to be investigated if Hong Kong is the base of operations with no corporate tax rates. Analysis: 1- The average free-and-easy bit rate is judge to decrease next year, from $ 15,344 (2000) to $ 14,747 (2001), i.e. a 3.9% decrease.

This is collect to the 0.90% percent decrease in expected entreat ore shipments. temporary hookup rates depend on the ask and supply topographic point of the market. After the first years ! decrease, there is a 1.5% to 2% increase expected in the iron ore shipments from year 2002 onwards. This implies that the expected cash flows are expected to increase all over time 2- harbor Value of the ship is $ 39,000,000. Present value of the ship after discounting payments @ 9% is $ 33,738,397 3- Assuming a discount rate of 9% and tax rate of 35%, and the ship is sold for scrap after 15 years for $ 5,000,000, the NPV of future cash flows is -$ 8,386,772 which is less(prenominal) than 0, which means the ship should not be purchased...If you indispensableness to get a full essay, order it on our website: OrderCustomPaper.com

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