**Opulence Corporation: Cruise Ship Financial Analysis**Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 3,500 passengers and costs $700 million to build. Assume the following additional information:- There will be 300 cruise days per year operated at a full capacity of 3,500 passengers.- The variable expenses per passenger are estimated to be $85 per cruise day.- The revenue per passenger is expected to be $425 per cruise day.- The fixed expenses for running the ship, other than depreciation, are estimated to be $92,820,000 per year.- The ship has a service life of 10 years, with a residual value of $110,000,000 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 ### Present Value and Net Cash Flow AnalysisBelow are the present value factors for various interest rates over multiple periods along with cash flow evaluation forms.#### Present Value Factors:| Period (n) | 4% | 6% | 8% | 10% | 12% | and more columns... ||:----------:|:----:|:----:|:----:|:----:|:----:|:----:|| 1 | 0.962| 0.943| 0.926| 0.909| 0.893|| 2 | 0.925| 0.890| 0.857| 0.826| 0.797|| 3 | 0.889| 0.840| 0.794| 0.751| 0.712|| 4 | 0.855| 0.792| 0.735| 0.683| 0.636|| 5 | 0.822| 0.747| 0.681| 0.621| 0.567|| 6 | 0.790| 0.705| 0.630| 0.564| 0.507|| 7 | 0.760| 0.665| 0.583| 0.513| 0.452|| 8 | 0.731| 0.627| 0.540| 0.467| 0.404|| 9 | 0.703| 0.592| 0.500| 0.424| 0.361|| 10 | 0.676| 0.558| 0.463| 0.386| 0.322|#### Steps to Analyze Cash Flow:###### a. Determine the annual net cash flow from operating the cruise ship.- **Revenues**: $ _______- **Variable expenses**: $ _______- **Fixed expenses**: $ _______**Annual net cash flow**: $ _______###### b. Determine the net present value of this investment, assuming a 10% minimum rate of return. Use the present value tables provided above. If required, round to the nearest whole dollar.- **

A ) Revenues = 3500 passengers x 300 days x 425 = 3500 x 300 x 425…

Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 3,500 passengers and cost $700 million to build. Assume the following additional information: • There will be 300 cruise days per year operated at a full capacity of 3,500 passengers. • The variable expenses per passenger are estimated to be $85 per cruise day. • The revenue per passenger is expected to be $425 per cruise day. • The fixed expenses for running the ship, other than depreciation, are estimated to be $92,820,000 per year. • The ship has a service life of 10 years, with a residual value of $110,000,000 at the end of 10 years.

Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 3,500 passengers and cost $700 million to build. Assume the following additional information: • There will be 300 cruise days per year operated at a full capacity of 3,500 passengers. • The variable expenses per passenger are estimated to be $85 per cruise day. • The revenue per passenger is expected to be $425 per cruise day. • The fixed expenses for running the ship, other than depreciation, are estimated to be $92,820,000 per year. • The ship has a service life of 10 years, with a residual value of $110,000,000 at the end of 10 years.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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