TO:MS. MARY LINN, VICE PRESIDENT OF FINANCE
FROM:CALEB CHOU, DIRECTOR OF STRATEGIC FINANCE
cause:NEW 180,000 TON CAPESIZE VESSEL
DATE:JANUARY 2001 (23/03/09 REWRITE)
CC:DR. TOM MILLER, reverence LOUIS UNIVERSITY DEPT. OF FINANCE
We recommend immediately commissioning a new 180,000 net ton capesize carrier to increase our capacity to meet dry pot beamping demands. We conservatively estimate that the new carrier go forth have a net Present Value of $407,000 provided the channel operates for 25 years and is delivered by 2003. The new watercraft whitethorn not be a profitable endeavor should the ship be scrapped at 15 years, per standard Ocean Carriers policy. Our Net 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 capital above inflation. Our analysis yielded 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 iron 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 engage 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 chance for more longer-term charters at higher rates in the future. NPV increases significantly with each charter of this type.
No scrap note appraise after 25 years. Because we lack data for scrap determine after 25 years, we have assumed $0 value 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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