What is the equivalent annual annuity for each ship

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Reference no: EM132808904

Seacraft Carriers is considering two alternative cargo ships. Ship A has an expected life of 7 years, will cost $60 million, and will produce net cash flows of $17 million per year. Ship B has a life of 14 years, will cost $75 million, and will produce net cash flows of $15 million per year. Seacraft plans to serve the route for 14 years. Inflation in operating costs, ship costs, and cargo rates is expected to be zero. The cost of capital is 12%. (Ignore CCA)

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Problem 1: What is the equivalent annual annuity for each ship? Which ship should be chosen?

Reference no: EM132808904

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