Demand for bite rates fluctuates widely based on worldwide regard for iron ore and blacken. When the market is strong, demand for cap size of its increases, leading to an increase in spot rates. During this time, broadcast owners seek to lock in cardinal year charters to take advantage of strong demand. When the market for ore and coal is weak, spot rates drop and charterers prefer to enter the spot market. In the case, it is noted that strong production of ore in Australia and India oer the long term give increase trading volumes and exact the use of large capsize vessels. Therefore, the long term vista for daily spot rates is thought to remain strong. However, the presently run forecast is not as promising. In 2001, 63 new ships are scheduled for delivery, and only three ships will be scrapped (fleet size of 612 in 2001 minus fleet size of 552 in 2000 = total increase of 60 ships). In addition, it is pass judgment that imports of iron ore and coal will remain stagnant oer the next two years. As a result, we expect the daily spot hire rates to decrease next year. Ms. Linn should project lower cash flows from spot rates over the next two years.
2) How much is the cost of a vessel in present value terms? What is the book value of the ship?
0 1 2
3.9MM 3.9MM 31.2MM
Present Value = 3.9 + (3.9/1.09) + (31.2/(1.09^2)) = $33,738,397.
Depreciation = 39M/25 = $1,560,000
Book Value = 39M 1.56M = $37,440,000
3) Should Ms. Linn purchase the capsize carrier? follow that it is going to be sold after 15 years. (Hint: effect the Free Cash...If you want to get a full essay, order it on our website: Ordercustompaper.com
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