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Holguin Ocean Carrier

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Submitted By caramelbaby82
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1- Ms. Linn should only purchase the $39,000,000 capsizes if the tax rate is zero % if its 35% it is not a good idea to do so. I came to this conclusion after doing an NPV/IRR analysis with both tax rate % using a 9% discount rate. The NPV with a 35% tax rate is negative 7,007,618 with 0% tax rate is positive 809,107. The IRR with a 35% tax rate is 6.01% with a 0% tax rate it is 9.34%.

2- Ms. Linn should not sale the ship for scrap value for 5 million instead she should do salvage value of the boat and sale the boat for much more. In order to get to this conclusion I created a year forecast for the boat of how much it will make for the remainder 10 years of it life expected. The ship will make above 15 million dollars also whoever buy the ship could later sale it for the scrape value. therefore the ship could be sold to a third person for more than the 5 million that pays to sale it for scrap.

3- In order to complete the revised analysis it is needed to forecast 25 years This is necessary because we want to know the value of the ship until its life expectance. This is related to salvage and scrap value assumed because we in order to know what is better option we need to know how much the boat it going to produce in the 25 years in order to determine if it is better to scrapped or sale it.

4- Ms. Linn should consider the daily hiring because this one will star to go lower meaning the boat will make less capital. Also she should consider the point in when she can get the most for the boat. Ms. Linn should consider the survey expense as this goes up every 5 years. Lastly the depreciation expense after the 25 years will be none as a result she will not get the tax break she get other

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