Ocean Carriers Project Analysis
Ocean Carriers Project Analysis
Introduction
Ocean Carriers receives a lease for a ship over three years starting in 2003. However, the company currently does not hold qualified ships that can meet customers’ demand. Our report is not only to assist Ms. Linn to decide whether or not to purchase a new ship but also give a reasonable suggestion on how long to hold on the ship regarding the NPV and long term prospective of dry bulk industry. Upon business operating in U.S or H.K, we consider four scenarios accordingly. In convenient of financial analysis, we propose several assumptions concerning tax rate, expected daily hire rate salvage value and growth rate. Under different scenarios valuation, we apply certain assumptions matched with scenario’s condition, as the following calculation indicating. Based on the analysis using data in case, we finally recommend that Ocean Carries should run business in H.K and hold the ship for 25 years.
Background
To begin with analysis, we forecast approximate development of daily spot rate regarding shipping market supply and demand. We firstly observe marketing conditions in 2001 and 2002, and then estimate changes in spot rate. In 2001, 63 new ships will be delivered, which will both apparently boost market supply band inevitably result in more intense market competition. However, market demand almost remains unchanged because world iron ore shipping stayed stagnant. Thus, the supply will surpass demand so that the rate tends to fall. While in 2002, the marketing condition may alter. Specially, the number of new ships slump about 50 percent, from 63 to 33. In contrast, world iron oral shipping is expected to climb by 2%. Therefore, the previous gap between market supply and demand will be compressed. Consequently, daily spot rate is likely to increase compared to 2001. Regarding long-term prediction on dry bulk industry, we consider more elements including production, trading pattern and exportation. Generally, both
Introduction
Ocean Carriers receives a lease for a ship over three years starting in 2003. However, the company currently does not hold qualified ships that can meet customers’ demand. Our report is not only to assist Ms. Linn to decide whether or not to purchase a new ship but also give a reasonable suggestion on how long to hold on the ship regarding the NPV and long term prospective of dry bulk industry. Upon business operating in U.S or H.K, we consider four scenarios accordingly. In convenient of financial analysis, we propose several assumptions concerning tax rate, expected daily hire rate salvage value and growth rate. Under different scenarios valuation, we apply certain assumptions matched with scenario’s condition, as the following calculation indicating. Based on the analysis using data in case, we finally recommend that Ocean Carries should run business in H.K and hold the ship for 25 years.
Background
To begin with analysis, we forecast approximate development of daily spot rate regarding shipping market supply and demand. We firstly observe marketing conditions in 2001 and 2002, and then estimate changes in spot rate. In 2001, 63 new ships will be delivered, which will both apparently boost market supply band inevitably result in more intense market competition. However, market demand almost remains unchanged because world iron ore shipping stayed stagnant. Thus, the supply will surpass demand so that the rate tends to fall. While in 2002, the marketing condition may alter. Specially, the number of new ships slump about 50 percent, from 63 to 33. In contrast, world iron oral shipping is expected to climb by 2%. Therefore, the previous gap between market supply and demand will be compressed. Consequently, daily spot rate is likely to increase compared to 2001. Regarding long-term prediction on dry bulk industry, we consider more elements including production, trading pattern and exportation. Generally, both