Business analysis

OCEAR CARRIERS INTEROFFICE MEMORANDUM TO:MS. MARY LINN, VICE PRESIDENT OF FINANCE FROM:CALEB CHOU, theater director OF STRATEGIC FINANCE cause:NEW 180,000 TON CAPESIZE watercraft DATE:JANUARY 2001 (23/03/09 REWRITE) CC:DR. TOM MILLER, reverence LOUIS UNIVERSITY DEPT. OF FINANCE We propose immediately commissioning a new 180,000 net long ton capesize carrier to increase our capacity to meet dry rat beamping demands. We orthodoxly estimate that the new carrier go fore have a net Present Value of $407,000 provided the telephone line operates for 25 years and is delivered by 2003. The new watercraft whitethorn not be a profitable endeavor should the embark be scrapped at 15 years, per standard Ocean Carriers policy. Our authorise Present Value calculations are based on the succeeding(a) conservative assumption: 9% discount rate for coin flow. actual inflation rate estimates are 3%. A 9% discount rate assumes a significant bell of hood above inflati on. Our analysis yielded an IRR of 9.18% over the 25 years. 1.2% forecasted number day by day charter rate ontogeny after 2005. Our shipping-industry consultants provided growth projections for constrict 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 aim rates after 2005. Our initial charterer has proposed a three-year charter from early(a) 2003 by means of 2005. We have assumed that after 2005, th e new vessel would be subject to substantial! ly lower market rates. However, our sound relationships with our charterers increases the stake for more longer-term charters at higher rates in the future. NPV increases significantly with each charter of this type. No scrap note measure out after 25 years. Because we lack data for scrap assure after 25 years, we have assumed $0 time value for the ship at the end of 25 years. It is certainly accomplishable that scrap value will be...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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