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Ocean Carriers

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Ocean Carriers: Case Study
MBA 540 Fall 204
Janelle Roche
King Quaidoo
Suzanne Ekstrom

Net Present Value: 15 Year Evaluation if the United States with a 35% Taxation Net present value is used in order to determine the present value of an investment by the discounted sum of all cash flows received from a project. In this case this would be the calculation of the single project capital budgeting for Ocean Carriers Inc. and a purchase of 15 year operation vessel. This 15 year time span would begin in 2000 and continue until 2017. Ocean Carries Inc. in this scenario would be subject to the United States 35% taxation. In order to calculate the net present value the free cash flow had to be calculated. Using the formula; EBIAT + depreciation – capital expenditure - change in net revenue + after tax proceeds from the sale of a ship (Year 17: $645,899 + $1,630,000 - 0 - ($756,295) + $8,710,000 = $11,742,193.61) the free cash flow was calculated. Using that calculation the present value of the free cash flow was calculated using the formula; Free cash flow / (1 + 9%) ^ Event year. After summing the total of the present value free cash flow the conclusion was the net present value.
After fully comprising the single project capital budget it can be concluded that the Net Present Value would equal -$7,805,694. The net present value rule states that an investment should be accepted if its net present value is greater than zero and should be rejected if it is less than zero. Following this rule Mary Linn should reject this project because it would not positively impact Ocean Carriers Inc.

Net Present Value: 15-Year Evaluation of Hong Kong with Zero Taxation The same single project capital budget was conducted in order to find the net present value of a 15-year purchase in Hong Kong. The difference between the United States and Hong Kong in this scenario is that Hong...

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