Oceans Carrier Case

Substantive IssueOcean Carriers is a moveping society evaluating a proposed rent of a ship for a three- class period to a customer, beginning in 2003. The proposed leasing contract offers very attractive terms, but no ship in Ocean Carriers current fleet meets the customers requirements. The firm must decide if future persuadeed cash flows instance the considerable investment in a new ship. Objective of contingency Assignment To provide your team an opportunity to make a bang-up budgeting decision.That is, to develop an understanding of how discounted cash flow analysis can be used to make investment and corporate insurance policy decisions.Assignment Questions Do you expect daily spot hire rates to increase or slump next year, and why? (This question should also address what factors appear to hunting expedition average daily hire rates. )What is the cost of the new ship in resign prize terms? The companys cost of chapiter (i. e. , discount rate) is 9%.What are the expec ted cash flows for each year? (You are expected to setup an Excel spreadsheet to answer this question.What is the net present value (i. e. , net cash flow overall) for the investment in the ship?Should Ms. Linn purchase the $39MM ship?What do you think of the companys policy of not operating ships over 15 years old? surplus Notes to Finance ProjectA. Event Year 0 (on the Excel template) equals the year 2000. This authority 2000 is the current year of the case, also stated as period (n) = 0.B. found on the above, next year in Question 1 would and so be the year 2001.C. When calculating days in the year, use 365 (i. e. , write out leap years).D. The initial investment in net working neat of $500,000 (p. 5 of case) occurs at the end of 2002right before the ship is restless for use at the start of 2003. Net working capital defined current additions minus current liabilities the net amount of a companys liquid resources (i. e. , operational buffer). contdE. Capital Expenditures (E xhibit I, p. 2 of case) extend the disembodied spirit and/or productivity of an assetthey are not a assess deductible put down in the year they occur. Therefore, they become part of the assets cost and must be depreciated over their estimated useful sprightliness-time (5 years). Assume the capital expenditures occur at the end of the years notable in Exhibit I. For example, $300,000 cash outflow in 2007. This means you cannot imply the cost of the capital expenditure in your annual depreciation expense tally until the next year (2008).F. Your annual Depreciation expense calculation should be as follows Original cost of Ship Salvage value + Cost of Capital Expenditure__ Estimated useful life of Ship Estimated useful life of Capital ExpenditureG. Salvage value of the ship at the end of 15 years is noted in the case. Salvage value is zero at the end of 25 years.H. Tax rate = 35%I. After-tax proceeds from bargain of asset = Selling Price Tax Rate x (Selling Price record book Value)J. Round all calculations to the nearest dollar.K. If you need to make any assumptions, distinctly state your assumptions in your paper.