Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781305961883
Author: Carl Warren
Publisher: Cengage Learning
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Chapter 15, Problem 15.11E
To determine
(a)
Concept introduction:
It is a method of determining the present value of
To compute:
The annual net
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Net Present Value Method for a Service Company
Carnival (CCL) has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Breeze, can hold up to 3,600 passengers, which can cost $750 million to build. Assume the following additional information:
There will be 340 cruise days per year operated at a full capacity of 3,600 passengers.
The variable expenses per passenger are estimated to be $100 per cruise day.
The revenue per passenger is expected to be $280 per cruise day.
The fixed expenses for running the ship, other than depreciation, are estimated to be $90,000,000 per year.
The ship has a service life of 10 years, with a residual value of $60,000,000 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…
Net Present Value Method for a Service Company
Carnival Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Breeze, can hold up to 3,600 passengers, and it can cost $800 million to build. Assume the following additional information:
There will be 330 cruise days per year operated at a full capacity of 3,600 passengers.
The variable expenses per passenger are estimated to be $110 per cruise day.
The revenue per passenger is expected to be $250 per cruise day.
The fixed expenses for running the ship, other than depreciation, are estimated to be $20,000,000 per year.
The ship has a service life of 10 years, with a residual value of $200,000,000 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…
Net Present Value Method for a Service Company
Opulence Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Bellwether, can hold up to 3,000 passengers and it can cost $600 million to build. Assume the following additional information:
There will be 300 cruise days per year operated at a full capacity of 3,000 passengers.
The variable expenses per passenger are estimated to be $75 per cruise day.
The revenue per passenger is expected to be $375 per cruise day.
The fixed expenses for running the ship, other than depreciation, are estimated to be $70,200,000 per year.
The ship has a service life of 10 years, with a residual value of $100,000,000 at the end of 10 years.
**TABLES ATTACHED IN IMAGES
A. Determine the annual net cash flow from operating the cruise ship.
Revenues
$
Variable expenses
Fixed expenses (other than depreciation)
Annual net cash flow
$
b. Determine the net present value of this…
Chapter 15 Solutions
Survey of Accounting (Accounting I)
Ch. 15 - Prob. 1SEQCh. 15 - Management is considering a $100,000 investmentin...Ch. 15 - The expected period of time that will elapse...Ch. 15 - A project that will cost $120,000 is estimated to...Ch. 15 - Prob. 5SEQCh. 15 - What are the principal objections to the use 01the...Ch. 15 - Discuss the principal limitations of the cash...Ch. 15 - Prob. 3CDQCh. 15 - Prob. 4CDQCh. 15 - Prob. 5CDQ
Ch. 15 - Prob. 6CDQCh. 15 - Prob. 7CDQCh. 15 - Prob. 8CDQCh. 15 - Prob. 9CDQCh. 15 - Prob. 10CDQCh. 15 - Prob. 11CDQCh. 15 - Prob. 12CDQCh. 15 - Prob. 13CDQCh. 15 - Prob. 14CDQCh. 15 - Prob. 15CDQCh. 15 - Monsanto Company, a large chemical and...Ch. 15 - Average rate of return The following data are...Ch. 15 - Prob. 15.2ECh. 15 - Average rate of return—new product Arrowhead Inc....Ch. 15 - Calculate cash flows Daffodil Inc. is planning to...Ch. 15 - Prob. 15.5ECh. 15 - Cash payback method Bliss Beauty Products ¡s...Ch. 15 - Prob. 15.7ECh. 15 - Prob. 15.8ECh. 15 - Net present value method—annuity Model 99 Hotels...Ch. 15 - Prob. 15.10ECh. 15 - Prob. 15.11ECh. 15 - Prob. 15.12ECh. 15 - Prob. 15.13ECh. 15 - Average rate of return, cash payback period, net...Ch. 15 - Prob. 15.15ECh. 15 - Internal rate of return method The internal rate...Ch. 15 - Prob. 15.17ECh. 15 - Internal rate of return method—two projects Strahn...Ch. 15 - Prob. 15.19ECh. 15 - Prob. 15.20ECh. 15 - Prob. 15.21ECh. 15 - Prob. 15.22ECh. 15 - Average rate of return method, net present value...Ch. 15 - Average rate of return method, net present value...Ch. 15 - Prob. 15.2.1PCh. 15 - Cash payback period, net present value method, and...Ch. 15 - Prob. 15.3.1PCh. 15 - Prob. 15.3.2PCh. 15 - Prob. 15.3.3PCh. 15 - Prob. 15.4.1PCh. 15 - Prob. 15.4.2PCh. 15 - Prob. 15.4.3PCh. 15 - Prob. 15.5.1PCh. 15 - Prob. 15.5.2PCh. 15 - Prob. 15.5.3PCh. 15 - Prob. 15.6.1PCh. 15 - Prob. 15.6.2PCh. 15 - Prob. 15.6.3PCh. 15 - Prob. 15.6.4PCh. 15 - Capital rationing decision involving four...Ch. 15 - Prob. 15.6.6PCh. 15 - Prob. 15.6.7PCh. 15 - Prob. 15.6.8PCh. 15 - Prob. 15.1.1MBACh. 15 - Prob. 15.1.2MBACh. 15 - Financial leverage MicrosoCortrepotied (MSFT)...Ch. 15 - Prob. 15.1.4MBACh. 15 - Prob. 15.2.1MBACh. 15 - Prob. 15.2.2MBACh. 15 - Prob. 15.2.3MBACh. 15 - Prob. 15.3.1MBACh. 15 - Prob. 15.3.2MBACh. 15 - Prob. 15.3.3MBACh. 15 - Prob. 15.4MBACh. 15 - Prob. 15.5.1MBACh. 15 - Financial leverage Costco Wholesale Corporation...Ch. 15 - Prob. 15.5.3MBACh. 15 - Prob. 15.5.4MBACh. 15 - Ethics and professional conduct in business Erin...Ch. 15 - Prob. 15.2.1CCh. 15 - Prob. 15.2.2CCh. 15 - Prob. 15.2.3CCh. 15 - Prob. 15.3.1CCh. 15 - Prob. 15.3.2CCh. 15 - Qualitative issues in investment analysis The...Ch. 15 - Prob. 15.5.1CCh. 15 - Prob. 15.5.2CCh. 15 - Prob. 15.6C
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- help pleasearrow_forwardNet Present Value Method 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 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…arrow_forwardNet Present Value Method Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 2,300 passengers and cost $460 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,300 passengers. The variable expenses per passenger are estimated to be $70 per cruise day. The revenue per passenger is expected to be $350 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $50,232,000 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…arrow_forward
- Net Present Value Method Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 2,300 passengers and cost $460 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,300 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 $60,996,000 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…arrow_forwardCarnival (CCL) has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Breeze, can hold up to 3,600 passengers, which can cost $750 million to build. Assume the following additional information: There will be 340 cruise days per year operated at a full capacity of 3,600 passengers. The variable expenses per passenger are estimated to be $100 per cruise day. The revenue per passenger is expected to be $280 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $90,000,000 per year. The ship has a service life of 10 years, with a residual value of $60,000,000 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…arrow_forwardCarnival Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Breeze, can hold up to 3,600 passengers, and it can cost $800 million to build. Assume the following additional information: There will be 330 cruise days per year operated at a full capacity of 3,600 passengers. The variable expenses per passenger are estimated to be $110 per cruise day. The revenue per passenger is expected to be $250 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $20,000,000 per year. The ship has a service life of 10 years, with a residual value of $200,000,000 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…arrow_forward
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