ECONOMY SHIPPING COMPANY case

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CONTENTS

Executive Summary ...................................................................................................................................... 1
EXHIBIT 1 – SCENARIO 1: REHABILITATION OF CYNTHIA SELLING EXISTING PARTS &
CONVERTING TO STOKER FIRING IN 1950 ......................................................................................... 3
EXHIBIT 2 – SCENARIO 2: REHABILITATION OF CYNTHIA USING EXISTING PARTS &
CONVERTING TO STOKER FIRING IN 1950 ......................................................................................... 3
EXHIBIT 3 – SCENARIO 3: REHABILITATION OF CYNTHIA SELLING EXISTING PARTS &
CONVERTING TO STOKER FIRING IN 1952 ......................................................................................... 4
EXHIBIT 4 – SCENARIO 4: REHABILITATION OF CYNTHIA USING EXISTING PARTS &
CONVERTING TO STOKER FIRING IN 1952 ......................................................................................... 4
EXHIBIT 5 – SCENARIO 4: PURCHASING A DIESEL-POWERED BOAT .......................................... 5
EXHIBIT 6 – SCENARIO 5: LEASE A DIESEL-POWERED BOAT ....................................................... 5

Executive Summary
Economy Shipping Company (ESC) was engaged mainly in the transportation industry and owned steam-powered boats. The company was considering whether to repair one of its’ steam boats or replacing it with a new diesel-powered vessel. After evaluating the different scenarios presented in the case, it is our recommendation that ESC should rent a diesel-powered boat. This decision was based on a Net Present Value (NPV) analysis on six different scenarios. Each scenario and its respective NPV is summarized below:
Scenario
1. Rehabilitation of Cynthia - selling existing parts & converting to stoker firer 1950
2. Rehabilitation of Cynthia - using existing parts & converting to stoker firer in 1950
3. Rehabilitation of Cynthia – selling existing parts & converting to stoker firer in 1952
4.

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