Ocean Carriers Solution Essay - 865 Words

Group 21 0. Introduction The following case study is based on the attached excel sheet, which has been set up in a dynamic approach. This means that the four underlying scenarios (25 years with and without tax and 15 years with and without tax) are linked to separate sheets, which enables the user of the model to calculate the net present value (NPV) for the different scenarios with ease. This is why we refrain from explaining every single step of the underlying calculation. In order to get a more detailed understanding of the various calculations, the reader of this analysis is welcome to have a closer look at our model. 1. Do you expect the daily spot hire rates to increase or decrease next year? Although we expect the†¦show more content†¦Judging from exhibit 6, overall the demand will be growing at 1.5% in the future. Also there is an expected increase in demand for capsize vessels considering the probable exports arising from Australia and India starting in 2003. From the shipment company`s perspective, even though the daily hire rates may be unstable, the growing demand in shipments will lead to an increase in the trading volume, which would ultimately give rise to the total revenue. In terms of economy, such features as globalization and the development of emerging markets will lead to a further demand for larger, more efficient vessels, presenting new requirement for capsizes. Taken these prospects into account, the capesize dry bulk industry looks promising in the long term. 4. Should Ms. Linn purchase the $39M capesize? In order to decide whether the company should implement the project or not the net present value approach (NPV) has been applied. Rather than explain each single step of our estimations, we will provide an overview of the underlying assumptions for the calculation of the NPV. This will ease the understanding of the attached excel sheet, where all steps can be back tested. 1 Step) Calculate revenues and expenses by making assumptions about the growth rates, depreciation methods, capital expenditures and changes in net working capital; 2 Step) Use the information and calculate the free cash flow for both scenarios (with and without taxes) in order to come up with theShow MoreRelatedOcean Carrier Case Solutions1049 Words   |  5 Pagesï » ¿Case Study: ‘Ocean Carriers’ By: Alyssa Linder Wenliang Zhang Xhangoli, Eva 1. Daily spot hire rates are determined according to supply and demand of the shipping capacity. According to the article, the supply of ships available equals the number of ships currently in the fleet plus any new ships added, minus any scrapings and sinking. According to Exhibit 2, there are a limited number of ships older than 24 years which are likely to be scraped. 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