Study About Ocean Carrier Case Solutions

Study About Ocean Carrier Case Solutions According to the article, when the market demand for shipping capacity was high, the owners would keep a vessel in operation as long as possible. In the reverse, when demand was low, scrapping rose. Supply was also influenced by the size and efficiency of the newer ships. As the ships got bigger and more efficient, fewer ships were needed to carry the same amount of cargo. As far at the demand goes for capesizes, analysts look primarily at the world economy.

Ocean Carriers case solution the economy is booming, most likely production and demand for iron ore and coal will increase. Also, changes in trade patterns affect the demand. For example, if the distance between the supply and the destination increased for iron ore, demand for capesizes would also increase. Finally, operating costs can also influence the daily hire rate.

Ocean Carriers case for these capesizes are around $4,000 per day, and are expected to increase to 1% above inflation. If for some reason, operating costs were to become much higher than expected, Casementors should take this into consideration when determining the daily hire rate.

The factors above are what help influence the daily hire rates, and although they are not conclusive and completely reliable, they will guide the decision making process.

The long-term prospects for the capesize dry bulk industry is based on the market conditions and demand. It is also based on technology and improvements in efficiency, which will affect the number of dry bulk capsizes required. Ocean Carriers case pdf Over 85% of the cargo on these capesizes are iron ore and coal, and demand for these products increases in a strong economy.

The long-term forecast for iron ore shipments indicates an annual growth rate of 2% from 2002 to 2005. After 2005, the growth rate will drop to a 1.5% rate, indefinitely. There will likely be higher trading volumes after 2003 with the start of the Australian and Indian ore exports.

Therefore, because of the Ocean Carriers case study solution large trading volume of iron ore and industry conditions, the capesize dry bulk industry looks good for the long-term. In terms of profitability of the capesize industry in the long-term, we believe that profitability will continue to thrive. As technology is constantly working to improve the ships in terms of efficiency, fewer ships are required to carry the same amount of cargo. Also, with further innovation, costs to build ships will eventually decrease and profits will increase. Overall, the long-term prospect of the capesize dry bulk industry looks optimistic.

Based on the information provided in the case, our group calculated the NPV for the project under both tax environment and tax-free condition, respectively, by using the Ocean Carriers case answers excel spreadsheet and the NPV function. (For a detailed calculation of NPV, please refer to Appendix Under According to our calculation, we have the following results: In the first case scenario, which the firm is in a tax environment (35% income tax), the NPV of the project equals to -$6,366,054.53 Under the second case scenario, which the firm is in a tax-free environment, the NPV equals to -$834,638.76 According to the NPV rule, Linn should not take up the project, because the NPV of the project is negative for both these two scenarios. 5.

Ocean Carriers case solution the firm’s point of view, the policy of not operating ships over 15 years old is designed to protect against uncertainty and to pursue a higher premium over the

market by having more relatively young vessels rather than old ships. However, based on our calculation of the NPV of the project, under the assumption that the company will continue to operate the ships until the 25 years of service, the results shows that the NPV is better when compared to the case that not operating ships over 15 years and the firm should take the project under the tax-free environment since the NPV turns out to be positive in that scenario.

(For a detailed calculation of NPV, please refer to Appendix Under 25-yr.)It turns out that the firm’s policy is not effective and is not a good investment policy because the firm will lose the opportunity to take advantage from the ROI in the later years of the ships due the restrictive policy. The result indicates that it will bring the firm greater benefit if the company chooses to operate the ships for a longer period.