ocean carriers case study
Dongyeon Kim 1408392
Di Roberto Matteo 1681386
Gutiérrez Agustina María Manuela
Rinaldi Claudia
Valeri Stefano 1672146
Case Study: Ocean Carriers
Corporate Finance
Class 16
Group Name:
Soul Analysts Ltd
Executive summary
Ocean Carriers is contemplating the opportunity of stipulating a 3-year leasing contract that would require commissioning the construction of a new vessel. In the short term applied hire rates are decreasing, just as they should be on the recovery side starting
2003. While signing a new client and therefore expanding the business, the aforementioned investment should be undertaken in Hong Kong. Furthermore, a 15year project is preferable, thus scrapping the vessel at an estimated price of $5M in order to reinvest that amount and avoid facing heavier upcoming costs. Although the longer lasting project (25 years) guarantees a higher net present value and forecasted rates seem to be increasing, less agility on future market occasions, increasing hire rates volatility and risks to bear for the corporation must be considered. Moreover, the alleged strong correlation between number of shipments and hire rates is being questioned. Summary of facts
Provided that Ocean carrier’s fleet doesn’t present a ship which meets the new customer’s requirements and that a fairly long time is needed to build a new one, the management has to decide in 2001 whether to commission a vessel for a 3-year time charter beginning in 2003 at an initial daily hire rate of $20,000 growing at a pace of
$200 per year of contract.
Statement of the problem
Many factors are to be considered such as the daily hire rate and operating cost trends, the supply and demand of iron ore and steel which form the 85% of capesize dry bulk carriers’ shipments. The headquarter location, on which the tax regime depends, is too a
critical decision: while in Hong Kong the operations would be exempt from tax, they
Di Roberto Matteo 1681386
Gutiérrez Agustina María Manuela
Rinaldi Claudia
Valeri Stefano 1672146
Case Study: Ocean Carriers
Corporate Finance
Class 16
Group Name:
Soul Analysts Ltd
Executive summary
Ocean Carriers is contemplating the opportunity of stipulating a 3-year leasing contract that would require commissioning the construction of a new vessel. In the short term applied hire rates are decreasing, just as they should be on the recovery side starting
2003. While signing a new client and therefore expanding the business, the aforementioned investment should be undertaken in Hong Kong. Furthermore, a 15year project is preferable, thus scrapping the vessel at an estimated price of $5M in order to reinvest that amount and avoid facing heavier upcoming costs. Although the longer lasting project (25 years) guarantees a higher net present value and forecasted rates seem to be increasing, less agility on future market occasions, increasing hire rates volatility and risks to bear for the corporation must be considered. Moreover, the alleged strong correlation between number of shipments and hire rates is being questioned. Summary of facts
Provided that Ocean carrier’s fleet doesn’t present a ship which meets the new customer’s requirements and that a fairly long time is needed to build a new one, the management has to decide in 2001 whether to commission a vessel for a 3-year time charter beginning in 2003 at an initial daily hire rate of $20,000 growing at a pace of
$200 per year of contract.
Statement of the problem
Many factors are to be considered such as the daily hire rate and operating cost trends, the supply and demand of iron ore and steel which form the 85% of capesize dry bulk carriers’ shipments. The headquarter location, on which the tax regime depends, is too a
critical decision: while in Hong Kong the operations would be exempt from tax, they