Business analysis

OCEAR CARRIERS INTEROFFICE MEMORANDUM TO:MS. MARY LINN, VICE PRESIDENT OF FINANCE FROM:CALEB CHOU, manager 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 press immediately commissioning a new 180,000 net net ton capesize carrier to increase our capacity to meet dry rush beamping demands. We unprogressively estimate that the new carrier go out have a net Present Value of $407,000 provided the highway operates for 25 years and is delivered by 2003. The new watercraft whitethorn not be a profitable endeavor should the carry be scrapped at 15 years, per standard Ocean Carriers policy. Our profit Present Value calculations are based on the succeeding(a) conservative assumption: 9% discount rate for coin flow. current inflation rate estimates are 3%. A 9% discount rate assumes a significant bell of great above inflation. Our analysis yiel ded an IRR of 9.18% over the 25 years. 1.2% forecasted number daily 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 suck up rates after 2005. Our initial charterer has proposed a three-year charter from early(a) 2003 through 2005. We have assumed that after 2005, the new vessel would be subject to substantially lower market rates. However,! our sound relationships with our charterers increases the run across for more longer-term charters at higher rates in the future. NPV increases significantly with each charter of this type. No scrap note follow after 25 years. Because we lack data for scrap picture after 25 years, we have assumed $0 rate for the ship at the end of 25 years. It is certainly achievable that scrap value will be...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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