Such is the recommendation assuming the forecasted hire rates and estimated costs are accurate over the long-term. This is much lower than the corporate tax rate in the United States. Demand for dry bulk carriers is determined by the world economy. According to Exhibit 2, there are a limited number of ships older than 24 years which are likely to be scraped. Therefore, due to this future stagnation the company will face a weak market position, resulting in lower daily spot hire rates.
A relevant cash flow is one that will change in relation to. Market conditions also drive rates since demand is dependent on the world economy. Capital budgeting, Cash flow, Discounted cash flow 982 Words 3 Pages Strategy and Valuation Case Analysis Ocean Carriers March 23, 2011 Executive Summary Industry Overview Capesize dry bulk carriers provide shipping services worldwide. The number of ships available is determined using the current number of vessels, the amount added to the fleet, and the scrapings. Supply was also influenced by the size and efficiency of the newer ships. Aggregate demand, Forward contract, Inverse demand function 1783 Words 5 Pages Background Ocean Carriers Inc. In particular, you need to study the Baldwin Case first Chapter 8.
Corporate tax, Depreciation, Investment 1462 Words 4 Pages Study 1 — Ocean Carriers 1. Sam OjoOctober 19, 2014 Understanding Cash Flows and Capital-Budgeting Decisions When evaluating cash flows for determining whether or not to pursue constructing a building to manufacture cupcakes there are several things to consider. Discount rate, Iron ore, Net present value 907 Words 3 Pages Financial Management Prof. The requirements specified by the customer demand the construction of a new vessel, which will take two years to construct. Mary Linn, Vice President of Finance, needs to decide if this is a profitable decision for the company. Currently, no ships in Ocean Carrier's fleet meet the requirements of the customer.
Cash flow, Depreciation, Discounted cash flow 992 Words 2 Pages reflect the true value of JetBlue. In January 2001, there were 553 capesize vessels in service throughout the world. What were the firm's major sources of cash? How would you characterize the long-term prospects of the capesize dry bulk industry? I assumed a steady inflation rate of 3% throughout the life of the project. However, Ocean Carriers does not currently have a ship to meet the requirements of the customer. The requirement for the cape-size is predicted being strong due to strong curiosity about primary cargo - iron ore and coal - Australia wide and India. In the reverse, when demand was low, scrapping rose.
New ships have a 15% premium and older than 25 received 35% discount on daily hire prices. We made an important assumption; we did not include capital expenditures linked to the last special survey, because we assumed that the company is scrapping the ship just before the special survey is conducted. Business terms, Depreciation, Discounted cash flow 600 Words 2 Pages Cash flow management: The life force of your businesses By LaZandrea Porter Cash flow management is a vital force to the success of any business, large or small. According to the dividend growth model, an asset that has no expected cash flows has a value of zero, so if investors are willing to purchase shares of stock in firms that pay no dividends, they evidently expect that the firms will begin paying dividends at some point in the future. Payback Period and Discounted Payback Period, while easy.
Characterize the long-term prospects of the capsize dry bulk industry 5. Ocean Carriers currently has no ship to accommodate the customer. 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. 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. Second, assume that Ocean Carriers is located in Hong Kong, where owners of Hong Kong ships are not required to pay any tax on profits made overseas and are also exempted from paying any tax on profit made on cargo uplifted from Hong Kong. It is the largest marine-based theme park in Asia, focusing on providing facilities for educational, recreational and conservation activities to the public.
The company also has a policy of selling ships that are older than fifteen years. 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. Corporate finance, Economic growth, Economics 575 Words 3 Pages bulk industry. Evaluate the factors that drive average hire rate 6. This case provides the opportunity to make a capital budgeting decision by using discounted cash flow analysis to make an investment and corporate policy decision. Ocean Carriers is a shipping company evaluating a proposed lease of a ship.
Bulk carrier, Cash flow, Discounted cash flow 4752 Words 17 Pages No with the assumption 1: Tax applied. Do you expect daily spot hire rates to increase or decrease next year? I used two types of capital expenditure capex in my calculations. First column shows the numbers in the case of operating a vessel for 15 years, whilst second column shows the values in case ship was to be operated for a longer period. Please see excel sheets From our analysis it appears that Ms. In order to do this our team used the provided expected daily hire rates to calculate revenue which we expect to be for the lifetime of this vessel. Daily spot rates are expected to decrease next year because 63 new vessels are scheduled for delivery over the next year and imports of ore and coal would most likely remain stagnant over the next two years.
Market outlook is good from 2003 due to increased iron ore shipments which is the primary usage of the vessel under consideration. In order to do this our team used the provided expected daily hire rates to calculate revenue which we expect to be for the lifetime of this vessel. Cash flow, Discounted cash flow, Interest 2378 Words 8 Pages iron ore shipments. Use the template in Blackboard to complete a capital budgeting analysis of the decision to purchase the existing consulting business. Also, as is shown in the article, Linn anticipated that the exports of iron ore and coal are not likely to take off until 2003, which give us a view that the imports of iron ore and coal would remain constant over the next two years.
The Capital Budgeting Decision Should Ms. I make this recommendation after thorough analysis of. The Net Present Value on the Ocean Carrier is not a positive number, a clear indicator that buying the vessels is not a good idea. Operating Cost The annual operating cost. How would you characterize the long-term prospects of the capesize dry bulk industry? In determining whether Ocean Carriers should purchase the new capesize carrier for the potential customer, we completed a net present value analysis of the project. The goal of this report is to assist the Vice President of Finance of Ocean Carriers, Mary Lynn to make a decision on whether or not… 751 Words 4 Pages Case 1: Ocean Carriers We think that daily spot hire rate will likely decrease next year.