Npv of Ocean Carriers
Table of Contents
TABLE OF CONTENTS 2
LIST OF FIGURES 2
LIST OF TABLES 2
1. INTRODUCTION 3
1.1 Executive Summary 3
1.2 Scope 3
1.3 Assumptions 3
1.4 Limitations 4
2. NATURE OF BUSINESS MODEL 4
3. KEY FINANCIAL ISSUES 4
3.1 Operational Costs: 5
3.2 Market Demand: 5
3.3 Charter Rates: 6
4. ALTERNATIVE INVESTMENTS & RISK MITIGATION STRATEGIES 6
4.1 SWOT Analysis 6
4.2 Alternative 1: Resale of Ship after 15 years of Operation 7
4.3 Alternative 2: Leasing or buying a Second hand Ship and renovate it 7
4.4 Alternative 3: Partnering 8
4.5 Alternative 5: Actively take part in Spot Market trading 8
5. RECOMMENDATIONS 8
5.1 Conclusion 11
6. ANNEXURE 11
7. GLOSSARY 11
8. REFERENCES 11
List of Figures
Figure 1: Cash flow comparison for 15 and 25 year term (NY) 9
Figure 2: Cash flow comparison for 15 and 25 year term (HK) 9
Figure 3: Revenue and Operating Expenses (HK) 10
List of Tables
Table 1: List of Assumptions made for NPV analysis 4
Table 2: List of Limitations on NPV Analysis. 4
Table 3: Estimation of Resale value of Carrier @15th year 7
1.
Introduction
1.1 Executive Summary
Ocean Carriers Inc. (OCI) is an International provider of Marine transportation services mainly focussing on Dry Bulk commodities mainly iron ore and coal. OCI has offices located in New York and Hongkong. One of OCI’s customer’s is keen in committing for a 3 year lease starting from 2003 for a large dry bulk Capesize carrier of capacity 180,000 DWT in order to fulfil its own interests. There is a potential opportunity for OCI to expand its current fleet with an addition of a large Capesize vessel. Most of OCI’s current fleet had been already leased, beginning from 2003. Looking at the feasibility and future market beyond 2006, it was very important for OCI to commit this deal immediately, since commissioning of a new ship will take at least 10 months and in order to secure this ship delivery on time, the Ship building must be finalized 2years in advance i.e.,
TABLE OF CONTENTS 2
LIST OF FIGURES 2
LIST OF TABLES 2
1. INTRODUCTION 3
1.1 Executive Summary 3
1.2 Scope 3
1.3 Assumptions 3
1.4 Limitations 4
2. NATURE OF BUSINESS MODEL 4
3. KEY FINANCIAL ISSUES 4
3.1 Operational Costs: 5
3.2 Market Demand: 5
3.3 Charter Rates: 6
4. ALTERNATIVE INVESTMENTS & RISK MITIGATION STRATEGIES 6
4.1 SWOT Analysis 6
4.2 Alternative 1: Resale of Ship after 15 years of Operation 7
4.3 Alternative 2: Leasing or buying a Second hand Ship and renovate it 7
4.4 Alternative 3: Partnering 8
4.5 Alternative 5: Actively take part in Spot Market trading 8
5. RECOMMENDATIONS 8
5.1 Conclusion 11
6. ANNEXURE 11
7. GLOSSARY 11
8. REFERENCES 11
List of Figures
Figure 1: Cash flow comparison for 15 and 25 year term (NY) 9
Figure 2: Cash flow comparison for 15 and 25 year term (HK) 9
Figure 3: Revenue and Operating Expenses (HK) 10
List of Tables
Table 1: List of Assumptions made for NPV analysis 4
Table 2: List of Limitations on NPV Analysis. 4
Table 3: Estimation of Resale value of Carrier @15th year 7
1.
Introduction
1.1 Executive Summary
Ocean Carriers Inc. (OCI) is an International provider of Marine transportation services mainly focussing on Dry Bulk commodities mainly iron ore and coal. OCI has offices located in New York and Hongkong. One of OCI’s customer’s is keen in committing for a 3 year lease starting from 2003 for a large dry bulk Capesize carrier of capacity 180,000 DWT in order to fulfil its own interests. There is a potential opportunity for OCI to expand its current fleet with an addition of a large Capesize vessel. Most of OCI’s current fleet had been already leased, beginning from 2003. Looking at the feasibility and future market beyond 2006, it was very important for OCI to commit this deal immediately, since commissioning of a new ship will take at least 10 months and in order to secure this ship delivery on time, the Ship building must be finalized 2years in advance i.e.,
References: 1. Ross, S.A. , R.W. Westerfield, J. F. Jaffe and B.D Jordan. Modern Financial Management. 8th ed. New York . McGraw Hill-Irwin, 2009. Chapter 7. 2 10 Guidelines mail received from Prof Dr. Fitzsimmons on: September 15, 2009 12:48 PM 11 Ross , S.A