Business analysis

OCEAR CARRIERS INTEROFFICE MEMORANDUM TO:MS. MARY LINN, VICE PRESIDENT OF FINANCE FROM:CALEB CHOU, coach OF STRATEGIC FINANCE cause:NEW 180,000 TON CAPESIZE vas DATE:JANUARY 2001 (23/03/09 REWRITE) CC:DR. TOM MILLER, reverence LOUIS UNIVERSITY DEPT. OF FINANCE We remember immediately commissioning a new 180,000 net ton capesize carrier to increase our capacity to meet dry vision beamping demands. We buttoned-uply estimate that the new carrier go aside have a net Present Value of $407,000 provided the agate line operates for 25 years and is delivered by 2003. The new watercraft whitethorn not be a profitable endeavor should the mail be scrapped at 15 years, per standard Ocean Carriers policy. Our kale Present Value calculations are based on the succeeding(a) conservative assumption: 9% discount rate for coin flow. latest inflation rate estimates are 3%. A 9% discount rate assumes a significant bell of with child(p) above inflation. Our analys is yielded an IRR of 9.18% over the 25 years. 1.2% forecasted number periodical charter rate ontogeny after 2005. Our shipping-industry consultants provided growth projections for push ore shipments at 1.5% after 2005. With Australian and Indian ore exports climb in 2003, real growth may very come up exceed 1.5%.

Should charter rate growth keep up with inflation, NPV would increase significantly. Market average expected daily utilize rates after 2005. Our initial charterer has proposed a three-year charter from early(a) 2003 done 2005. We have assumed that after 2005, the new vessel would be su bject to substantially lower market rates. ! However, our sound relationships with our charterers increases the feel for more longer-term charters at higher rates in the future. NPV increases significantly with each charter of this type. No scrap note prize after 25 years. Because we lack data for scrap run across after 25 years, we have assumed $0 appraise for the ship at the end of 25 years. It is certainly doable that scrap value will be...If you want to get a full essay, order it on our website: OrderCustomPaper.com

If you want to get a full essay, visit our page: write my paper