The Ocean Carriers Case
Your assignment is to provide a written analysis of the case. Keep in mind the rules for group assignments from the syllabus. We will discuss the case in class as indicated in the syllabus. All team members should be knowledgeable about the facts of the assigned case, as I will randomly solicit discussion from class members.
Ocean Carriers uses a 9% discount rate.
While dealing with the decision problem at hand, your report should address the following questions:
Do you expect daily spot hire rates to increase or decrease next year? What factors drive average daily hire rates?
How would you characterize the long-term prospects of the capsize dry bulk industry? Should Ms Linn purchase the $39M capsize? Make 2 different assumptions. First, assume that Ocean Carriers is a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong, where owners of Hong Kong ships are not required to pay any tax on profits made overseas and are also exempted from paying any tax on profit made on cargo uplifted from Hong Kong.
5. What do you think of the company’s policy of not operating ships over 15 years old?
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30017 Corporate Finance
Guidelines for your case write-up:
What follows is a pretty exhaustive outline for case preparation. You are likely to work on plenty of cases while at Bocconi and may already have done so. I have found that this detailed outline steers students towards the right approach and outcome.
1. Read cases carefully and analyze all statistical data. It may be useful to read the case two, three or more times if necessary. Most cases are short, but loaded with relevant facts. 2. Determine the major problem or problems involved in the case. 3. With the problem(s) in mind, think about and search for alternative courses of action that are feasible. Extra research may be necessary at this stage. Consult your finance textbooks, course materials and other references.
4. Develop your plan for presenting the case in written form. B. A strongly recommended (but not required) way of organizing your report is to divide your report into six parts, as follows:
1. Executive Summary: Half a page that concentrates on the statement of the problem and your recommendations, but not on the process used to reach your conclusion. The executive summary stands on its own and is designed to provide a concise briefing for a busy executive.
2. Summary of Facts: Present a very brief summary of important facts. Omit nonessential facts that do not affect your analysis of the problem. Keep in mind that the intended audience of your report probably also works for the company and is familiar with the basic facts of the case.
3. Statement of Problem: State the problem or problems which you intend to analyze and that you feel are most important. Attempt to state the problem in one or two short sentences. The ability to state a problem concisely and clearly is an extremely valuable skill. Practice it now!
4. Analysis: Present your analysis or discussion in a rough outline form using complete sentences or short paragraphs. Use headings, spacing, indentations, and other techniques to organize and invite attention to the important points in your analysis. Each of the exhibits attached to your write-up should be referenced within the discussion section. This section of the report is where you use logic, judgment and your problem solving ability to support your recommendations. The strengths and weaknesses of the alternative courses of action should be developed in this section. Support your ideas with carefully developed financial data. Your analysis should be organized and written in such a way that a reader will be led directly to your recommendations at the end of the case.
5. Recommendations: This section should also be very brief. A solution must be given to the problem(s)...