National Cruise is considering purchasing a new ship that will cost $600,000,000. The president of the company asked the CFO to analyze cash flows associated with operating the ship under two alternative itineraries: Itinerary 1, Caribbean Winter/ Alaska and Itinerary 2, Caribbean/ Eastern Canada. The CFO estimatedt he following cash flows, which are expected to apply to each of the next 15 years: Caribbean/ Alaska Caribbean/ E. Canada Net revenue $120,000,000 $105,000,000 Less: Direct program expenses ($25,000,000) ($24,000,000) Indirect program expenses ($20,000,000) ($20,000,000) Non- operating expenses ($21,000,000) ($21,000,000) Add back depreciation $115,000,000 $155,000,000 Cash flow per year $169,000,000 $155,000,000 The estimated cost of the new ship and during of expected cash flows is: Estimated cost of new ship $600,000,000 Estimated period of cash flows in years 15 a) for each of the itineraries, calculate the present values of the cash flows using required rates of return on both 12% and 16% using both present value factors adn separately using Excel PV function. Assume a 15 year time horizon. Shoudl the company purchase the ship with either or? (Please show how to calculate, as this is where I'm struggling) Caribbean/ Alaska 12% Cash flow Factor ? x ? = ? Caribbean/ Alaska 16% Cash flow Factor ? x ? = ? Caribbean/ E. Canada 12% Cash flow Factor ? x ? = ? Caribbean/ E. Canada 16% Cash flow Factor ? x ? = ?
National Cruise is considering purchasing a new ship that will cost $600,000,000. The president of the company asked the CFO to analyze
Caribbean/ Alaska Caribbean/ E. Canada
Net revenue $120,000,000 $105,000,000
Less:
Direct program expenses ($25,000,000) ($24,000,000)
Indirect program expenses ($20,000,000) ($20,000,000)
Non- operating expenses ($21,000,000) ($21,000,000)
Add back
Cash flow per year $169,000,000 $155,000,000
The estimated cost of the new ship and during of expected cash flows is:
Estimated cost of new ship $600,000,000
Estimated period of cash flows in years 15
a) for each of the itineraries, calculate the present values of the cash flows using required
Caribbean/ Alaska 12%
Cash flow Factor
? x ? = ?
Caribbean/ Alaska 16%
Cash flow Factor
? x ? = ?
Caribbean/ E. Canada 12%
Cash flow Factor
? x ? = ?
Caribbean/ E. Canada 16%
Cash flow Factor
? x ? = ?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
