We made an important assumption; we did not include capital expenditures linked to the last special survey, because we assumed that the company is Ocean carriers case the ship just before the special survey is conducted.
Secondly, due to low Ocean carriers case for older ships, leasing the same vessel in future might be an ineffective venture. Iron ore vessel shipments are going to increase due to new players joining the iron ore industry: Thus, we advise the company to keep the ship longer than year period, since operating the vessel over a longer period will earn additional profit and the ship can be scrapped some time later, granting the same million dollars.
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.
Recommendations In conclusion, keeping in mind what we demonstrated before, the company should invest in the production of the new vessel only in Hong Kong and should not scrap it after 15 years, because its NPV will still be positive.
Overall investment Despite negative market conditions in the upcoming 2 years, long-term prospects look much more promising. Hire Writer Statement of problem The duration of the leasing contract is quite short so the company has to analyze whether the investment as a whole will prove to be profitable even after the closure of the contract.
However, there are few factors that signal why company might be willing to get rid of the vessel. In order to do so, they will have to take into account the fluctuations of the daily spot rates in the short and long terms, as well as existing differences in taxation policies within its offices in Hong Kong and in the United States.
Therefore, due to this future stagnation the company will face a weak market position, resulting in lower daily spot hire rates. Investment decision We computed two separate calculations for given two assumptions in Exhibit 2.
Last but not least, the company has to question the tenability of its year policy. According to our calculations presented in the Exhibit 2, scrapping the vessel before the 15th year is not recommended. Another important fact to consider is that in the first scenario, when the company operates ship only for 15 years, we excluded the capital expenditure for related to the survey, Whilst, in the second scenario, while operating the ship for more than 15 years, we added the yearly capital expenditure back.
Results show that the NPV of a ship after 15 years is higher than the scrap value of 5 million dollars. In fact, older ships are riskier and are less efficient. How to cite this page Choose cite format: Our calculations show that NPV in the first scenario is negative in both -6, and - 4, due to very high taxes, while in the second scenario the NPV is positive in both 1, and 4, As a consequence, in this new global market, daily charter rates and spot daily charter rates will probably rise producing additional demand for shipments.Ocean Carriers Case Study Overview Ocean Carriers, Inc.
is a shipping company with offices in Hong Kong and New York. In JanuaryMary Linn, Vice President of Finance must make a decision on a proposed contract in which Ocean Carriers would lease one ship to a client for three years and the customer would begin utilizing the.
Case study: Ocean Carriers Inc. Members Gianmarco de Simone - Nicola Di Palma - Nicolò Dubini - Maria Vittoria Moschini - Quent. Piiru0 Rodney Piiru OceanCarriers 2/23/ Ocean Carriers Case Report. Executive Summary.
Given the current and expected market conditions, the financial department of the Ocean Carriers Group is to evaluate the potential revenues and expenses of commissioning a new capsize ship for cargo transportation in order to meet a received demand for lease.
Ocean Carriers Case Solution,Ocean Carriers Case Analysis, Ocean Carriers Case Study Solution, OVERVIEW Ocean Carriers is a shipping company with offices in New York and Hong Kong that operates iron ore capsize carriers with cargo capacities of.
Ocean Carriers Case Analysis Background Problem Question #1 Answer #1 Question #2 Answer #2 Question #3 Do you expect daily spot hire rates to .Download