Halcyon Lines is considering the purchase of a new bulk carrier for $8.8 million. The forecasted revenues are $5.8 million a year and operating costs are $4.8 million. A major refit costing S$2.8 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $2.3 million. a. What is the NPV if the opportunity cost of capital is 8%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Net present value $ b. Halcyon could finance the ship by borrowing the entire investment at an interest rate of 4.5%. Will this borrowing opportunity affect your calculation of NPV? (Click to select)

Halcyon Lines is considering the purchase of a new bulk carrier for $8.8 million. The forecasted revenues are $5.8 million a year and operating costs are $4.8 million. A major refit costing S$2.8 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $2.3 million. a. What is the NPV if the opportunity cost of capital is 8%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Net present value $ b. Halcyon could finance the ship by borrowing the entire investment at an interest rate of 4.5%. Will this borrowing opportunity affect your calculation of NPV? (Click to select)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 16P: Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of...

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