Ocean Carriers Case Study
Autor: Sharon • February 4, 2018 • 1,218 Words (5 Pages) • 824 Views
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One assumption is made in our NPV calculation: Since the ship is fully depreciated in 25 years, we assume a zero revenue from selling or scrapping the ship in the 25th year.
As a result, if we compare the NPV of -7,267,952 in appendix E with -7,805,694 in appendix A where the company scrap with $5 million in the 15th year, the company should reject the policy of not operating ships over 15 years.
If we compare the NPV of -7,267,952 in appendix E with -6,213,599 in appendix A where the company sells into secondhand market in the 15th year, the policy of not operating ships over 15 years would be better than continuing to use until the 25th year.
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Appendix A - 35% of tax rate & scrap the ship at $5 million
End of Year
Initial Investment
Net Working Capital
After-tax Revenue
After-tax Operating Costs
Depreciation Tax Shield
Capitalized Expenditure
Capitalized Expenditure Tax Shield
After-tax Salvage Value
Net Cash Flow
Discount Factor
NPV
2000
-3,900,000
-3,900,000
1.00
-3,900,000
2001
-3,900,000
-3,900,000
0.92
-3,577,982
2002
-31,200,000
-500,000
-31,700,000
0.84
-26,681,256
2003
-15,000
4,641,000
-949,000
546,000
4,223,000
0.77
3,260,931
2004
-15,450
4,687,410
-986,960
546,000
4,231,000
0.71
2,997,347
2005
-15,914
4,733,820
-1,026,438
546,000
4,237,468
0.65
2,754,064
2006
-16,391
4,342,584
-1,067,496
546,000
3,804,697
0.60
2,268,616
2007
-16,883
4,010,520
-1,110,196
546,000
-300,000
3,129,442
0.55
1,711,912
2008
-17,389
4,011,015
-1,154,604
546,000
21,000
3,406,023
0.50
1,709,368
2009
-17,911
4,057,135
-1,200,788
546,000
21,000
3,405,436
0.46
1,567,958
2010
-18,448
4,103,943
-1,248,819
546,000
21,000
3,403,675
0.42
1,437,749
2011
-19,002
4,151,209
-1,298,772
546,000
21,000
3,400,436
0.39
1,317,781
2012
-19,572
3,998,855
-1,350,723
546,000
-350,000
21,000
2,845,560
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