Halcyon Lines is considering the purchase of a new bulk carrier for $8 million. The forecasted...

Halcyon Lines is considering the purchase of a new bulk carrier for $8 million. The
forecasted revenues are $5 million a year and operating costs are $4 million. A major
refit costing $2 million will be required after both the fifth and tenth years. After 15
years, the ship is expected to be sold for scrap at $1.5 million. If the discount rate is 8%,
what is the ship’s NPV?

Recalculate the NPV of the previous problem at interest rates of 5, 10, and 15%. Plot the points on a
graph with NPV on the vertical axis and the discount rates on the horizontal axis. At what discount rate
(approximately) would the project have zero NPV? Please explain how you can check your answer.

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 20 hours ago

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