Reference no: EM131446127
Racette & Sons (R&S), a Colorado shipyard, has approached RNI with a design incorporating a Kort nozzle, extensively automated navigation and power control systems, and much more comfortable accommodations for the crew. R&S is offering the new vessel for a fixed price of $3,000,000, payable half immediately and half on delivery in one year. Estimated annual operating costs of the new vessel are in Table 5. The operating cost estimates in the table are current for March 2016, but will increase with inflation. The crew would require additional training to handle the new vessel’s more complex and sophisticated equipment. Training would result in a one-time cost of $50,000 payable one year following delivery of the new vessel. This cost is tax deductible. The estimated operating costs for the new vessel assume that it would be operated in the same way as the old ship the Maracas. However, the new vessel will be able to handle a larger load on some routes, which is expected to generate additional revenues, net of additional operating costs, of approximately $175,000 per year in the first year of operation. These revenues are expected to grow at the rate of inflation (1.25% a year). Revenues and operating costs from the new vessel will begin one year after it is delivered. The new vessel is estimated to have a useful service life of 20 years, but it will be depreciated for tax purposes according to the 7-year MACRS schedule. The new vessel is not expected to have any resale value at the end of its 20-year useful life. All revenues and costs (including depreciation) associated with the new vessel will begin one year after it is delivered.
Table 5: Operating Costs of New Vessel:
Fuel $380,000
Labor and benefits 330,000
Maintenance 70,000
Other 105,000
Total: $885,000
Calculate the present value of buying and operating the new vessel. What, if any, additional information would be useful to you in your analysis? Write a few paragraphs giving your answer and clearly explaining your reasoning and computations; show detailed computations in your Excel spreadsheet labeled Exhibit 2.
How rhetoric is demonstrated in your discipline
: The point of the assignment is to explore a topic in more depth and relay what you have learned in a structured, formal argument or research paper.
|
What is the internal rate of return on this investment
: The cash flows from a project is as follows: (Year 0 -3000), (Year 1 1000), (Year 2 1000), (Year 3 3000) What is the actual (annualized) return on investment if we assume that intermediate cash flows can be reinvested at 10%? What is the internal rat..
|
Why is an appraisal important when buying a home
: Why is an appraisal important when buying a home? and What are some of the costs associated with buying a home? What are some of the other fees and charges that get added to a home loan on top of the interest we pay? Please provide examples?
|
About the cash flows associated with putting in the bank
: Think about the cash flows associated with putting in the bank for five years, assuming you draw out the interest each year and then close the account. Now think about a set of hypothetical cash flows associated with putting the same money in a busin..
|
Present value of buying and operating the new vessel
: Racette & Sons (R&S), a Colorado shipyard, has approached RNI with a design incorporating a Kort nozzle, extensively automated navigation and power control systems, and much more comfortable accommodations for the crew. Calculate the present value of..
|
Developing a mobility program for an inpatient unit
: To prepare for this assessment, you will need to think about changes you feel are needed to address a problem either within nursing as a professional field or within the organization where you work. Narrow down your options by considering which ch..
|
Network design for kids korner
: To gain approval for a new network design, upgrade, or enhancement, you will have to present your network design, project costs, and project plan to all the stakeholders, which includes senior leadership. Through the last five weeks, you have crea..
|
What is the optimal decision strategy for dante
: MGMT 4600- What is the optimal decision strategy for Dante, and what is the expected profit for this project? What would the cost of the market research study have to be before Dante would change its decision about the market research study?
|
Under what circumstances does the investor make profit
: An investor buys put share for stock and $40. Under what circumstances does the investor make a profit? Under what tances will the option be exercised? diagram showing the variation of the investors profit with the stock price at the maturity of the ..
|