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Based on the information provided below, compute the Net Present Value of the project (CO 3).  A Net Present Value Template is Attached.  (Hint: Don't forget to update the discount rate to the amount required for this project and add your cash flow numbers.)

Royal Dutch Shipping is planning on Investing $1,600,000 to buy a freighter.   Prepare a net present value analysis based on the assumption that the freighter will be sold for 10% of its cost at the end of the year 5.   Assume a 10% cost of capital (this is the discount rate).  Annual operating cash flows for the project are:

Year 1:   $380,000
Year 2:   $390,000
Year 3:   $400,000
Year 4:   $410,000
Year 5:   $420,000

Prepare a loan amortization schedule based on monthly payments for the $1,600,000 if Royal Dutch Shipping can pay 10% down on a loan for $1,600,000 and can get a loan for 6% interest for 10 years (do not include this in your Net Present Value computations.  This is a separate issue.  (CO 3).  (Hint:  www.bankrate.com/calculators/mortgages/amortization-calculator.aspx )

 

 

 

Follow the format for the discounted cash flow valuation for the project in the NPV Example spreadsheet.
Do not ignore the salvage value for the ship in year 5.
  
  
Use Sheet 2 to submit the Loan Amortization table.  Remember the loan is
amortized (paid off) monthly.

 

 

    • 6 years ago
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