OCEAR CARRIERS INTEROFFICE MEMORANDUM TO:MS. MARY LINN, VICE PRESIDENT OF FINANCE FROM:CALEB CHOU, handler 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 exhort immediately commissioning a new 180,000 net gross ton capesize carrier to increase our capacity to meet dry portion beamping demands. We buttoned-downly estimate that the new carrier go off have a net Present Value of $407,000 provided the extend operates for 25 years and is delivered by 2003. The new watercraft may not be a profitable endeavor should the transmit be scrapped at 15 years, per standard Ocean Carriers policy. Our lowest Present Value calculations are based on the succeeding(a) conservative assumption: 9% discount rate for coin flow. certain 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 periodical charter rate ontogeny after 2005. Our shipping-industry consultants provided growth projections for beseech 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 importantly. Market average expected daily interest rates after 2005. Our initial charterer has proposed a three-year charter from early(a) 2003 through with(predicate) 2005. We have assumed that after 2005, the new vesse l would be subject to substantially lower ma! rket rates. However, our sound relationships with our charterers increases the bump 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 descend after 25 years, we have assumed $0 take to be 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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