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Halcyon Lines is considering the purchase of a new bulk carrier
Halcyon Lines is considering the purchase of a new bulk carrier of $6.9 million. The forecasted revenue are $6.7 million a year and operating cost are $5.7 million. A major refit costing $3.7 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $3.2 million. What is the net present? b. Halcyon could finance the ship by borrowing the entire investment at an interest rate of $4.5%. Will the borrowing opportunity affect your calculation of NPV?
Present value of cash flows
Less: Initial investment
Cash outfl Net cash fl
0 6900000 -6900000
6700000 5700000 1000000
This question was answered on: Feb 21, 2020
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