Determine the annual net cash flows from operating the cruise ship. Revenues $fill in the blank 1 Less: Variable expenses fill in the blank 2 Fixed expenses fill in the blank 3 Annual net cash flows $fill in the blank 4 b. Determine the net present value of this investment, assuming a 15% 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
Determine the annual net cash flows from operating the cruise ship. Revenues $fill in the blank 1 Less: Variable expenses fill in the blank 2 Fixed expenses fill in the blank 3 Annual net cash flows $fill in the blank 4 b. Determine the net present value of this investment, assuming a 15% 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
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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Question
Blue Ocean Corporation placed into service some of the largest cruise ships in the world. One of these ships can hold up to 2,500 passengers and cost $500 million to build. Assume the following additional information:
- There will be 300 cruise days per year operated at a full capacity of 2,500 passengers.
- The variable expenses per passenger are estimated to be $90 per cruise day.
- The revenue per passenger is expected to be $450 per cruise day.
- The fixed expenses for running the ship, other than
depreciation , are estimated to be $69,500,000 per year. - The ship has a service life of 10 years, with a residual value of $80,000,000 at the end of 10 years.
| Present Value of $1 at |
|||||
| 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 |
|||||
| 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 |
a. Determine the annual net cash flows from operating the cruise ship.
| Revenues | $fill in the blank 1 | |
| Less: Variable expenses | fill in the blank 2 | |
| Fixed expenses | fill in the blank 3 | |
| Annual net cash flows | $fill in the blank 4 |
b. Determine the net present value of this investment, assuming a 15% minimum
| 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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