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A ship captain who buys commodities on islands where they are cheap and selling them on islands where they cost more. For this, he uses a fleet of ships that can cargo (tradeable commodities) and shield themselves and the rest of your fleet from thieves. Ships are reviewed by their tons of cargo that they can carry and their "Combat Rating," this is the number of tons they can protect from being marauded by pirates, and the number of operating crew. There are 2 ships that can be purchase: Name Corvette Freighter Cargo Combat 10T 0 100T 0. ShipCost Crew $1M $10M 1 10 So, it would take 10 Corvettes to fully protect the cargo of one freighter. If any cargo is left unprotected, there is a 50% chance that it will be raided by pirates and taken.

A ship captain who buys commodities on islands where they are cheap and selling them on islands where they cost more. For this, he uses a fleet of ships that can cargo (tradeable commodities) and shield themselves and the rest of your fleet from thieves. Ships are reviewed by their tons of cargo that they can carry and their "Combat Rating," this is the number of tons they can protect from being marauded by pirates, and the number of operating crew. There are 2 ships that can be purchase: Name Corvette Freighter Cargo Combat 10T 0 100T 0. ShipCost Crew $1M $10M 1 10 So, it would take 10 Corvettes to fully protect the cargo of one freighter. If any cargo is left unprotected, there is a 50% chance that it will be raided by pirates and taken.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A ship captain who buys commodities on islands where they are cheap and selling them on islands where they cost more. For this, he uses a fleet of ships that can cargo (tradeable commodities) and shield themselves and the rest of your fleet from thieves. Ships are reviewed by their tons of cargo that they can carry and their "Combat Rating," this is the number of tons they can protect from being marauded by pirates, and the number of operating crew. There are 2 ships that can be purchase: Name Corvette Freighter Cargo Combat 0 10T 100T 0. ShipCost Crew $1M $10M 1 10 So, it would take 10 Corvettes to fully protect the cargo of one freighter. If any cargo is left unprotected, there is a 50% chance that it will be raided by pirates and taken. This means that if you purchased 9 Corvettes and 1 Freighter, 10T of cargo would be unprotected and there would be a 50% chance that pirates would steal the 10T of unprotected cargo. Suppose that each day, you can buy tons of food for $500 ($182,500 annually per ton) and sell them at a nearby island for $725 ($264,625 annually per ton) and that each day you must pay your crew $1000 ($365,000 annually per crew member) out of the profits that you earn. You have $100M to spend and the market-wide annual interest rate is 1.75%. 1. Show that with your $100M, the most cargo that you could carry while being fully protected from pirates would be a fleet that consists of 5 Freighters and 50 Corvettes. 2. You are considering instead investing your money. How much profit per year would you make if you purchased the fleet from part 1? How much interest would you earn (in total) if you instead invested your money at the market- wide interest rate
Transcribed Image Text:A ship captain who buys commodities on islands where they are cheap and selling them on islands where they cost more. For this, he uses a fleet of ships that can cargo (tradeable commodities) and shield themselves and the rest of your fleet from thieves. Ships are reviewed by their tons of cargo that they can carry and their "Combat Rating," this is the number of tons they can protect from being marauded by pirates, and the number of operating crew. There are 2 ships that can be purchase: Name Corvette Freighter Cargo Combat 0 10T 100T 0. ShipCost Crew $1M $10M 1 10 So, it would take 10 Corvettes to fully protect the cargo of one freighter. If any cargo is left unprotected, there is a 50% chance that it will be raided by pirates and taken. This means that if you purchased 9 Corvettes and 1 Freighter, 10T of cargo would be unprotected and there would be a 50% chance that pirates would steal the 10T of unprotected cargo. Suppose that each day, you can buy tons of food for $500 ($182,500 annually per ton) and sell them at a nearby island for $725 ($264,625 annually per ton) and that each day you must pay your crew $1000 ($365,000 annually per crew member) out of the profits that you earn. You have $100M to spend and the market-wide annual interest rate is 1.75%. 1. Show that with your $100M, the most cargo that you could carry while being fully protected from pirates would be a fleet that consists of 5 Freighters and 50 Corvettes. 2. You are considering instead investing your money. How much profit per year would you make if you purchased the fleet from part 1? How much interest would you earn (in total) if you instead invested your money at the market- wide interest rate
Expert Solution
Step 1

As per given information

There are 2 types of ships in the fleet.

Corvette and Freighter

Corvette has the capacity to protect 10T from stealing by Pirates.

The freighter has the capacity to shield 100 T from thieves.

Cost of  1 Corvette $1M and it requires to 1 crew

Cost of  1 freighter $10M and it requires to 10 crew

Buying food price=$500 per ton and selling price=$725 per ton

Cost of the per crew member =$1000 per day

 

 

 

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