HW#7 RULES OF MORDERN FINANCE (FALL 2012)
" Ocean Carriers” case
1) Do you expect daily spot retain the services of rates to improve or reduce next year? I expect daily spot work with rates to decrease next year.
Based upon Exhibit several, order publication in 2002 for dry out bulk capsizes decreased, indicating a decrease in demand. In the meantime, Based on Demonstrate 2, the majority of capsize fleets in Dec 2000 will be in the era within 12-15 years, most notable, the largest portion is of all those under a few years. They may work well and turn mire adult till 2002, indicating simply no significantly boost will take place in 2002. In addition , scrappings and sinkings are extremely few to get the modern times, also indicating not much embrace supply. With demand lower whereas source stays moderate, I expect the daily hire rates to decrease next year.
2) What factors travel daily hire rates?
As the daily spot hire level is determined by supply and require. All factors affect source and demand for capsize fast count. Factors affecting the provision are the volume of ships obtainable, which means the number of vessels in service the prior year plus any fresh ships shipped minus any kind of scrappings and sinkings. Elements in this formula all subject. Factors impacting demand can be the frequency of scrapping recently, which is based on average regarding current tip over and efficiency of them. If the supply enhance whereas the demand remains constant the rates will reduce, and the result reverses below opposite scenario.
3) How would you define the long-term prospects of the capesize dry bulk sector? It is positive.
In the first place, based on the conclusion of the consulting firm, globally iron ore vessel deliveries was to get 2% gross annual growth since next year then drop to 1. 5% thereafter. It means the entire industry can gain an increasing popularity season by year due to more demand for ore and coal under better world economic climate. Meanwhile, with Australian creation in iron ore remaining strong and India's thriving production, a much more demand for tip over will be raised as trading with the two countries mostly rely on shipments because of their geography. Thus, the long-term prospects from the capsize dried bulk market is quite upbeat in the long run. 1)
4) Initially, assume that Marine Carriers is a US company subject to 35% taxation. Second, assume that Marine Carriers is situated in Hong Kong, where owners of Hong Kong boats are not necessary to pay any tax in profits built overseas and are generally exempted from paying any kind of tax upon profit made on cargo uplifted from Hong Kong. SUPPOSITION 1| tax rate= 35% discount rate=9% inflation=3% most money are in hundreds ($)| | | | | | | | | | Age of ship| | | | you | 2 | 3 | 5 | 5 | 6 | several | almost 8 | 9 | 15 | 11 | 12 | 13 | 13 | 12-15 | Event Year| 0 | 1 | a couple of | several | four | five | 6 | 7 | eight | on the lookout for | twelve | 14 | doze | 13 | 13 | 15 | of sixteen | 17 | Calender Year| 2k | 2001 | 2002 | 2003 | 2004 | 2006 | 2006 | 3 years ago | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | Investments: | | | | | | | | | | | | | | | | | | | (1)Purchasing of capesize| | (3900)| (3900)| (31200)| | | | | | | | | | | | | | | (2)Salvage | | | | | | | | | | | | | | | | | | 5000 | (3)Accumulated Depreciation| | | | 1560 | 3120 | 4680 | 6240 | 7800 | 9360 | 10920 | 12480 | 14040 | 15600 | 17160 | 18720 | 20280 | 21840 | 23400 | (4)Adjusted basis of
equipment after devaluation
(end of the year)| | | | 37440 | 35880 | 34320 | 32760 | 31200 | 29640 | 28080 | 26520 | 24960 | 23400 | 21840 | 20280 | 18720 | 17160 | 15600 | (5)Net working capital| | 500 | 515 | 530 | 546 | 563 | 580 | 597 | 615 | 633 | 652 | 672 | 692 | 713 | 734 | 756 | 779 | 0 | (6)Change in net