Assuming that the cost of purchasing and operating

Reference no: EM13618533

Copan Shipping just purchased an oil tanker at a cost of $450 million. The tanker has an expected life of 20 years, with an expected salvage value of $20 million. However, the Tax Reform Act of 2006 specifies that oil tankers and transport ships may be depreciated using straight-line depreciation over a 9-year life. The cost of operating the tanker is expected to be $10 million per year. Copan Shipping has a marginal tax rate of 30 percent and a required return of 10 percent.

Determine the yearly after-tax cost of owning and operating the tanker:

a. assuming that the cost of purchasing and operating sea-going vessels (e.g., oil tankers) are expected to remain constant over the next 20 years,

b. assuming that the cost of purchasing and operating sea-going vessels (e.g., oil tankers) are expected to increase by 8 percent per year over the foreseeable future [Hint: If the cost of ships is increasing or decreasing at a constant rate over time, then you may reasonably assume that the yearly cost of leasing the equipment will decrease steadily over time. Thus, you can approximate the impact of expected changes in the cost of ships by treating the after-tax annual equivalent cost of machine as a growing annuity stream.]

Reference no: EM13618533

Questions Cloud

B if the speed of the bat is increased is the frequency : a bat moving with speed of 3.25 ms and emitting sound of 35.0 khz approaches a moth at rest on a tree trunk. a what

A particle known as a pion lives for a short time before : a particle known as a pion lives for a short time before breaking apart into other particles. suppose it is moving at a

Edwards enterprises follows a moderate current asset : edwards enterprises follows a moderate current asset investment policy but it is now considering a change perhaps to a

A 20 kg ball and a 35kg ball are connected by a 25m long : a 2.0 kg ball and a 3.5kg ball are connected by a 2.5m long rigid massless rod. the rod and balls are rotating

Assuming that the cost of purchasing and operating : copan shipping just purchased an oil tanker at a cost of 450 million. the tanker has an expected life of 20 years with

T travels to the right with speed v it then enters a : a singly ionized nickel atom has an overall charge of 1e where e 1.602 x 10-19 c and a mass m 9.80 x 10-26 kg. it

Upon return the people on earth will have aged exactly one : suppose you are planning a trip in which a spacecraft is to travel at a constant velocity for exactlyseven months as

A firm buys on terms of 315 net 45 it does not take the : a firm buys on terms of 315 net 45. it does not take the discount and it generally pays after 60 days. what is the

In the past sunnyfax publishing paid out all its earnings : in the past sunnyfax publishing paid out all its earnings as dividends. when the stock market opened for trading today

User Account

All Pages