Will borrowing opportunity affect your calcuation of npv

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Halcyon Lines is conisdering the purchase of a new bulk carrier for $8.7 million. The forecasted revenues are $5.7 million a year and operating costs are $4.7 million. A major refit costing $2.7 million will be required after both the fifth and tenth years. After 15, years, the ship is expected to be sold for scrap at $2.2 million.

Problem a. What is the NPV if the opportunity cost of capital is 12%?

Problem b. Halcyon could finance the ship by borrowing the entire investment at an interest rate of 4.5%. Will this borrowing opportunity affect your calcuation of NPV?

Reference no: EM132984318

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