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Blue Ocean Corporation placed into service some of the largest cruise ships in the world. One of these ships can hold up to 2,200 passengers and cost $440 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,200 passengers. The variable expenses per passenger are estimated to be $80 per cruise day. The revenue per passenger is expected to be $400 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $54,400,000 per year. The ship has a service life of 10 years, with a residual value of $70,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine the net present value of this investment, assuming a 12% minimum rate of return. Use the present value tables above. Present value of annual net cash flows $fill in the blank 5 Present value of residual value fill in the blank 6 Total present value $fill in the blank 7 Initial investment fill in the blank 8 Net present value $fill in the blank 9

Blue Ocean Corporation placed into service some of the largest cruise ships in the world. One of these ships can hold up to 2,200 passengers and cost $440 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,200 passengers. The variable expenses per passenger are estimated to be $80 per cruise day. The revenue per passenger is expected to be $400 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $54,400,000 per year. The ship has a service life of 10 years, with a residual value of $70,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine the net present value of this investment, assuming a 12% minimum rate of return. Use the present value tables above. Present value of annual net cash flows $fill in the blank 5 Present value of residual value fill in the blank 6 Total present value $fill in the blank 7 Initial investment fill in the blank 8 Net present value $fill in the blank 9

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Blue Ocean Corporation placed into service some of the largest cruise ships in the world. One of these ships can hold up to 2,200 passengers and cost $440 million to build. Assume the following additional information:

  • There will be 300 cruise days per year operated at a full capacity of 2,200 passengers.
  • The variable expenses per passenger are estimated to be $80 per cruise day.
  • The revenue per passenger is expected to be $400 per cruise day.
  • The fixed expenses for running the ship, other than depreciation, are estimated to be $54,400,000 per year.
  • The ship has a service life of 10 years, with a residual value of $70,000,000 at the end of 10 years.
Present Value of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 0.890 0.826 0.797 0.756 0.694
3 0.840 0.751 0.712 0.658 0.579
4 0.792 0.683 0.636 0.572 0.482
5 0.747 0.621 0.567 0.497 0.402
6 0.705 0.564 0.507 0.432 0.335
7 0.665 0.513 0.452 0.376 0.279
8 0.627 0.467 0.404 0.327 0.233
9 0.592 0.424 0.361 0.284 0.194
10 0.558 0.386 0.322 0.247 0.162



Present Value of an Annuity of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736 1.690 1.626 1.528
3 2.673 2.487 2.402 2.283 2.106
4 3.465 3.170 3.037 2.855 2.589
5 4.212 3.791 3.605 3.353 2.991
6 4.917 4.355 4.111 3.785 3.326
7 5.582 4.868 4.564 4.160 3.605
8 6.210 5.335 4.968 4.487 3.837
9 6.802 5.759 5.328 4.772 4.031
10 7.360 6.145 5.650 5.019 4.192

Determine the net present value of this investment, assuming a 12% minimum rate of return. Use the present value tables above.

Present value of annual net cash flows $fill in the blank 5
Present value of residual value fill in the blank 6
Total present value $fill in the blank 7
Initial investment fill in the blank 8
Net present value $fill in the blank 9
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