1. How would you characterize the long term prospects of this business (the capsize dry bulk industry) - going up or going down? Strong or weak? Give specific reasons why.

2. For the last tab, make any adjustments to any part of the forecast and free cash flows projection, including adjusting any of the input values, to optimize the IRR and NPV of the boat. However, your adjustments or changes must be logical and possible, given the facts you have in the case, and your general knowledge of the market and situation involved.

List below what you changed, and why you feel it is logically possible in this situation, and why this is the best possibility.

3. What about the third tab and your solution, which is a 15 year boat life and a 0% tax rate by operating in Hong Kong? Does this look like a good possibility? Why or why not?

4. Based on your analysis, would you recommend that the $39 million capsize be bought? Why or why not?

5. What do you think of the company's policy not to operate ships over 15 years old?

6. What about the second tab and your solution, which is a 25 year boat life and a 0% tax rate by operating in Hong Kong? Does this look like a good possibility? Why or why not?

7. The case includes computing the IRR and NPV for Ocean Carriers when taxes were 35% (in the United States) and the boat life was 25 years. Prepare on the labeled tabs of the spreadsheet the four different scenarios asked for.

You will need to change input values and possibly the structure of the forecast and free cash flow analysis for each tab. You should turn in each of your computations done on the separate tabs of the spreadsheet. Those tabs have the lab solution on them as a starting template for computing these other questions and creating the other tabs. YOU NEED TO CHANGE THE ASSUMPTIONS IN THE SPREADSHEETS - it is not done for you, since each one is still the lab situation of 35% taxes and a 25 year boat life.

What is your analysis of the first tab as a possibility for the company - it is the situation of a 15 year boat life, and a 35% tax rate? Does this look like a good possibility? Why or why not?

OCEAN CARRIERS FORECAST OVERALL ASSUMPTIONS ABOUT THE BOAT Cost of Boat (paid over 3 years) Inflation Rate - Operating Costs Inflation Rate - Working Capital $ Year Date 39,000,000 4.00% 3.00% 0 1/1/2001 1 12/31/2001 2 12/31/2002 Average Depreciation Years - Boat Average Depreciation Years - Refurbishings Salvage Value - Boat Average Tax Rate 3 12/31/2003 $ Daily Revenue ("Daily Hire Rate") Days Hired (per year) Daily Operating Costs $ $ 4 12/31/2004 5 12/31/2005 6 12/31/2006 7 12/31/2007 8 12/31/2008 9 12/31/2009 10 12/31/2010 11 12/31/2011 12 12/31/2012 13 12/31/2013 14 12/31/2014 15 12/31/2015 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 35.00% 20,000 $ 357 4,000 $ 20,200 $ 357 4,160 $ 20,400 $ 357 4,326 $ 18,714 $ 357 4,499 $ 17,283 $ 357 4,679 $ 17,481 $ 353 4,867 $ 17,682 $ 353 5,061 $ 17,886 $ 353 5,264 $ 18,092 $ 353 5,474 $ 17,428 $ 353 5,693 $ 17,628 $ 349 5,921 $ 17,831 $ 349 6,158 $ 18,036 349 6,404 Every 5 Year Refurbishing Costs $ 300,000 $ 350,000 PARTIAL INCOME STATEMENT (WITHOUT COST OF CAPITAL) Revenue Operating Costs $ $ 7,140,000 $ 1,428,000 $ 7,211,400 $ 1,485,120 $ 7,282,800 $ 1,544,525 $ 6,680,898 $ 1,606,306 $ 6,170,031 $ 1,670,558 $ 6,170,793 $ 1,717,914 $ 6,241,746 $ 1,786,630 $ 6,313,758 $ 1,858,096 $ 6,386,476 $ 1,932,419 $ 6,152,084 $ 2,009,716 $ 6,152,172 $ 2,066,421 $ 6,223,019 $ 2,149,078 $ 6,294,564 2,235,041 Operating Profit $ 5,712,000 $ 5,726,280 $ 5,738,275 $ 5,074,592 $ 4,499,473 $ 4,452,879 $ 4,455,116 $ 4,455,662 $ 4,454,057 $ 4,142,368 $ 4,085,751 $ 4,073,941 $ 4,059,523 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 70,000 $ 70,000 $ 70,000 Depreciation Boat Refurbishing #1 Refurbishing #2 Refurbishing #3 Refurbishing #4 Taxable Income (without cost of capital) Income Tax Net Income (without cost of capital) $ $ $ 3,714,592 $ 1,300,107 $ 2,414,485 $ 3,139,473 $ 1,098,816 $ 2,040,657 $ 3,032,879 $ 1,061,508 $ 1,971,371 $ 3,035,116 $ 1,062,290 $ 1,972,825 $ 3,035,662 $ 1,062,482 $ 1,973,181 $ 3,034,057 $ 1,061,920 $ 1,972,137 $ 2,722,368 $ 952,829 $ 1,769,539 $ 2,655,751 $ 929,513 $ 1,726,238 $ 2,643,941 $ 925,379 $ 1,718,562 $ 2,629,523 920,333 1,709,190 500,000 $ 515,000 $ 530,450 $ 546,364 $ 562,754 $ 579,637 $ 597,026 $ 614,937 $ 633,385 $ 652,387 $ 671,958 $ 692,117 $ 712,880 0 $ -4,140,545.95 6.83% 9% 3,900,000 $ 7,800,000 $ $ 39,000,000 $ 1,360,000 $ 39,000,000 $ 2,720,000 $ 39,000,000 $ 4,080,000 $ 39,000,000 $ 5,440,000 $ 39,000,000 $ 6,800,000 $ $ $ 39,000,000 8,160,000 300,000 60,000 $ FREE CASH FLOWS Assumed WACC rate for NPV calculation 4,378,275 $ 1,532,396 $ 2,845,879 $ $ Total Assets (including all net working capital) NPV IRR 4,366,280 $ 1,528,198 $ 2,838,082 $ $ PARTIAL BALANCE SHEET (WITHOUT LIABILITIES AND EQUITY) Assets (including all net working capital) Net Working Capital (Inventory, A/R, A/P) Fixed Assets Boat Less: Accumulated Depreciation Refurbishing #1 Less: Accumulated Depreciation Refurbishing #2 Less: Accumulated Depreciation Refurbishing #3 Less: Accumulated Depreciation Refurbishing #4 Less: Accumulated Depreciation 4,352,000 $ 1,523,200 $ 2,828,800 $ 3,900,000 $ 7,800,000 $ 38,140,000 $ 36,795,000 $ 35,450,450 $ 34,106,364 $ 32,762,754 $ 31,659,637 $ 30,257,026 $ 3,758,571 6 3,384,267 7 3,374,489 8 3,375,436 9 (3,900,000) 1 (3,900,000) 2 (27,511,200) 3 4,183,082 4 4,190,429 5 $ $ $ $ 39,000,000 9,520,000 300,000 120,000 $ $ $ $ 39,000,000 10,880,000 300,000 180,000 $ $ $ $ 28,854,937 $ 3,375,270 10 39,000,000 12,240,000 300,000 240,000 $ $ $ $ 39,000,000 13,600,000 300,000 300,000 $ $ $ $ $ $ 39,000,000 14,960,000 300,000 300,000 350,000 70,000 $ $ $ $ $ $ 39,000,000 16,320,000 300,000 300,000 350,000 140,000 $ $ $ $ $ $ 39,000,000 17,680,000 300,000 300,000 350,000 210,000 22,172,880 27,453,385 $ 26,052,387 $ 24,991,958 $ 23,582,117 $ 3,373,689 11 3,170,537 12 3,136,667 13 3,128,403 14 3,118,426 15 16 12/31/2016 $ $ $ 17 12/31/2017 18 12/31/2018 19 12/31/2019 20 12/31/2020 21 12/31/2021 22 12/31/2022 23 12/31/2023 24 12/31/2024 25 12/31/2025 26 12/31/2026 27 12/31/2027 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 35.00% 18,243 $ 349 6,660 $ 14,762 $ 349 6,927 $ 14,932 $ 349 7,204 $ 15,104 $ 349 7,492 $ 15,278 $ 349 7,792 $ 15,454 $ 349 8,103 $ 14,654 $ 349 8,427 $ 14,823 $ 349 8,764 $ 14,993 $ 349 9,115 $ 15,166 $ 349 9,480 $ 15,341 $ 349 9,859 $ 13,488 349 10,253 $ 750,000 $ 850,000 $ $ 6,366,807 $ 2,324,443 $ 5,151,938 $ 2,417,420 $ 5,211,268 $ 2,514,117 $ 5,271,296 $ 2,614,682 $ 5,332,022 $ 2,719,269 $ 5,393,446 $ 2,828,040 $ 5,114,246 $ 2,941,161 $ 5,173,227 $ 3,058,808 $ 5,232,557 $ 3,181,160 $ 5,292,934 $ 3,308,407 $ 5,354,009 $ 3,440,743 $ 4,707,312 3,578,373 $ 4,042,364 $ 2,734,518 $ 2,697,151 $ 2,656,614 $ 2,612,753 $ 2,565,406 $ 2,173,085 $ 2,114,419 $ 2,051,397 $ 1,984,527 $ 1,913,266 $ 1,128,939 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 70,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ $ 170,000 $ 170,000 $ 170,000 $ 170,000 $ 170,000 70,000 $ 150,000 $ $ $ 2,612,364 $ 914,328 $ 1,698,037 $ 1,304,518 $ 456,581 $ 847,936 $ 1,187,151 $ 415,503 $ 771,648 $ 1,146,614 $ 401,315 $ 745,299 $ 1,102,753 $ 385,964 $ 716,789 $ 1,055,406 $ 369,392 $ 686,014 $ 663,085 $ 232,080 $ 431,005 $ 584,419 $ 204,547 $ 379,872 $ 521,397 $ 182,489 $ 338,908 $ 454,527 $ 159,085 $ 295,443 $ 383,266 $ 134,143 $ 249,123 $ (401,061) (140,371) (260,689) $ 734,267 $ 756,295 $ 778,984 $ 802,353 $ 826,424 $ 851,217 $ 876,753 $ 903,056 $ 930,147 $ 958,052 $ 986,793 $ 1,016,397 $ $ $ $ $ $ 39,000,000 19,040,000 300,000 300,000 350,000 280,000 $ 20,764,267 $ 3,106,650 16 $ $ $ $ $ $ 39,000,000 20,400,000 300,000 300,000 350,000 350,000 $ $ $ $ $ $ $ $ 19,356,295 $ 2,255,908 17 39,000,000 21,760,000 300,000 300,000 350,000 350,000 750,000 150,000 $ $ $ $ $ $ $ $ 18,618,984 $ 2,258,959 18 39,000,000 23,120,000 300,000 300,000 350,000 350,000 750,000 300,000 $ $ $ $ $ $ $ $ 39,000,000 24,480,000 300,000 300,000 350,000 350,000 750,000 450,000 $ $ $ $ $ $ $ $ 39,000,000 25,840,000 300,000 300,000 350,000 350,000 750,000 600,000 $ $ $ $ $ $ $ $ 39,000,000 27,200,000 300,000 300,000 350,000 350,000 750,000 750,000 $ $ $ $ $ $ $ $ $ $ 39,000,000 28,560,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 170,000 $ $ $ $ $ $ $ $ $ $ 39,000,000 29,920,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 340,000 $ $ $ $ $ $ $ $ $ $ 17,132,353 $ 15,646,424 $ 14,161,217 $ 12,676,753 $ 12,023,056 $ 10,520,147 $ 2,231,930 19 2,202,719 20 2,171,221 21 1,915,468 22 1,883,570 23 1,841,816 24 39,000,000 31,280,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 510,000 $ $ $ $ $ $ $ $ $ $ 39,000,000 32,640,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 680,000 $ $ $ $ $ $ $ $ $ $ 39,000,000 34,000,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 850,000 9,018,052 $ 7,516,793 $ 6,016,397 1,797,538 25 1,750,381 26 1,239,707 27 OCEAN CARRIERS FORECAST OVERALL ASSUMPTIONS ABOUT THE BOAT Cost of Boat (paid over 3 years) Inflation Rate - Operating Costs Inflation Rate - Working Capital $ Year Date 39,000,000 4.00% 3.00% 0 1/1/2001 1 12/31/2001 2 12/31/2002 Average Depreciation Years - Boat Average Depreciation Years - Refurbishings Salvage Value - Boat Average Tax Rate 3 12/31/2003 $ Daily Revenue ("Daily Hire Rate") Days Hired (per year) Daily Operating Costs $ $ 4 12/31/2004 5 12/31/2005 6 12/31/2006 7 12/31/2007 8 12/31/2008 9 12/31/2009 10 12/31/2010 11 12/31/2011 12 12/31/2012 13 12/31/2013 14 12/31/2014 15 12/31/2015 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 $ 35.00% 25 5 5,000,000 35.00% 20,000 $ 357 4,000 $ 20,200 $ 357 4,160 $ 20,400 $ 357 4,326 $ 18,714 $ 357 4,499 $ 17,283 $ 357 4,679 $ 17,481 $ 353 4,867 $ 17,682 $ 353 5,061 $ 17,886 $ 353 5,264 $ 18,092 $ 353 5,474 $ 17,428 $ 353 5,693 $ 17,628 $ 349 5,921 $ 17,831 $ 349 6,158 $ 18,036 349 6,404 Every 5 Year Refurbishing Costs $ 300,000 $ 350,000 PARTIAL INCOME STATEMENT (WITHOUT COST OF CAPITAL) Revenue Operating Costs $ $ 7,140,000 $ 1,428,000 $ 7,211,400 $ 1,485,120 $ 7,282,800 $ 1,544,525 $ 6,680,898 $ 1,606,306 $ 6,170,031 $ 1,670,558 $ 6,170,793 $ 1,717,914 $ 6,241,746 $ 1,786,630 $ 6,313,758 $ 1,858,096 $ 6,386,476 $ 1,932,419 $ 6,152,084 $ 2,009,716 $ 6,152,172 $ 2,066,421 $ 6,223,019 $ 2,149,078 $ 6,294,564 2,235,041 Operating Profit $ 5,712,000 $ 5,726,280 $ 5,738,275 $ 5,074,592 $ 4,499,473 $ 4,452,879 $ 4,455,116 $ 4,455,662 $ 4,454,057 $ 4,142,368 $ 4,085,751 $ 4,073,941 $ 4,059,523 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 70,000 $ 70,000 $ 70,000 Depreciation Boat Refurbishing #1 Refurbishing #2 Refurbishing #3 Refurbishing #4 Taxable Income (without cost of capital) Income Tax Net Income (without cost of capital) $ $ $ 3,714,592 $ 1,300,107 $ 2,414,485 $ 3,139,473 $ 1,098,816 $ 2,040,657 $ 3,032,879 $ 1,061,508 $ 1,971,371 $ 3,035,116 $ 1,062,290 $ 1,972,825 $ 3,035,662 $ 1,062,482 $ 1,973,181 $ 3,034,057 $ 1,061,920 $ 1,972,137 $ 2,722,368 $ 952,829 $ 1,769,539 $ 2,655,751 $ 929,513 $ 1,726,238 $ 2,643,941 $ 925,379 $ 1,718,562 $ 2,629,523 920,333 1,709,190 500,000 $ 515,000 $ 530,450 $ 546,364 $ 562,754 $ 579,637 $ 597,026 $ 614,937 $ 633,385 $ 652,387 $ 671,958 $ 692,117 $ 712,880 0 $ -7,097,669.26 4.13% 9% 3,900,000 $ 7,800,000 $ $ 39,000,000 $ 1,360,000 $ 39,000,000 $ 2,720,000 $ 39,000,000 $ 4,080,000 $ 39,000,000 $ 5,440,000 $ 39,000,000 $ 6,800,000 $ $ $ 39,000,000 8,160,000 300,000 60,000 $ FREE CASH FLOWS Assumed WACC rate for NPV calculation 4,378,275 $ 1,532,396 $ 2,845,879 $ $ Total Assets (including all net working capital) NPV IRR 4,366,280 $ 1,528,198 $ 2,838,082 $ $ PARTIAL BALANCE SHEET (WITHOUT LIABILITIES AND EQUITY) Assets (including all net working capital) Net Working Capital (Inventory, A/R, A/P) Fixed Assets Boat Less: Accumulated Depreciation Refurbishing #1 Less: Accumulated Depreciation Refurbishing #2 Less: Accumulated Depreciation Refurbishing #3 Less: Accumulated Depreciation Refurbishing #4 Less: Accumulated Depreciation 4,352,000 $ 1,523,200 $ 2,828,800 $ 3,900,000 $ 7,800,000 $ 38,140,000 $ 36,795,000 $ 35,450,450 $ 34,106,364 $ 32,762,754 $ 31,659,637 $ 30,257,026 $ 3,758,571 6 3,384,267 7 3,374,489 8 3,375,436 9 (3,900,000) 1 (3,900,000) 2 (27,511,200) 3 4,183,082 4 4,190,429 5 $ $ $ $ 39,000,000 9,520,000 300,000 120,000 $ $ $ $ 39,000,000 10,880,000 300,000 180,000 $ $ $ $ 28,854,937 $ 3,375,270 10 39,000,000 12,240,000 300,000 240,000 $ $ $ $ 39,000,000 13,600,000 300,000 300,000 $ $ $ $ $ $ 39,000,000 14,960,000 300,000 300,000 350,000 70,000 $ $ $ $ $ $ 39,000,000 16,320,000 300,000 300,000 350,000 140,000 $ $ $ $ $ $ 39,000,000 17,680,000 300,000 300,000 350,000 210,000 22,172,880 27,453,385 $ 26,052,387 $ 24,991,958 $ 23,582,117 $ 3,373,689 11 3,170,537 12 3,136,667 13 3,128,403 14 3,118,426 15 16 12/31/2016 17 12/31/2017 25 5 5,000,000 $ 35.00% 25 5 5,000,000 35.00% $ 18,243 $ 349 6,660 $ 14,762 349 6,927 $ $ 6,366,807 $ 2,324,443 $ 5,151,938 2,417,420 $ 4,042,364 $ 2,734,518 $ 1,360,000 $ 1,360,000 $ 70,000 $ 70,000 $ $ $ 2,612,364 $ 914,328 $ 1,698,037 $ 1,304,518 456,581 847,936 $ 734,267 $ 756,295 $ $ $ $ $ $ $ $ 39,000,000 19,040,000 300,000 300,000 350,000 280,000 $ $ $ $ $ $ 39,000,000 20,400,000 300,000 300,000 350,000 350,000 $ 20,764,267 $ 19,356,295 3,106,650 16 2,255,908 17 OCEAN CARRIERS FORECAST OVERALL ASSUMPTIONS ABOUT THE BOAT Cost of Boat (paid over 3 years) Inflation Rate - Operating Costs Inflation Rate - Working Capital $ Year Date 39,000,000 4.00% 3.00% 0 1/1/2001 1 12/31/2001 2 12/31/2002 Average Depreciation Years - Boat Average Depreciation Years - Refurbishings Salvage Value - Boat Average Tax Rate 3 12/31/2003 $ Daily Revenue ("Daily Hire Rate") Days Hired (per year) Daily Operating Costs $ $ 4 12/31/2004 5 12/31/2005 6 12/31/2006 7 12/31/2007 8 12/31/2008 9 12/31/2009 10 12/31/2010 11 12/31/2011 12 12/31/2012 13 12/31/2013 14 12/31/2014 15 12/31/2015 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 0.00% 20,000 $ 357 4,000 $ 20,200 $ 357 4,160 $ 20,400 $ 357 4,326 $ 18,714 $ 357 4,499 $ 17,283 $ 357 4,679 $ 17,481 $ 353 4,867 $ 17,682 $ 353 5,061 $ 17,886 $ 353 5,264 $ 18,092 $ 353 5,474 $ 17,428 $ 353 5,693 $ 17,628 $ 349 5,921 $ 17,831 $ 349 6,158 $ 18,036 349 6,404 Every 5 Year Refurbishing Costs $ 300,000 $ 350,000 PARTIAL INCOME STATEMENT (WITHOUT COST OF CAPITAL) Revenue Operating Costs $ $ 7,140,000 $ 1,428,000 $ 7,211,400 $ 1,485,120 $ 7,282,800 $ 1,544,525 $ 6,680,898 $ 1,606,306 $ 6,170,031 $ 1,670,558 $ 6,170,793 $ 1,717,914 $ 6,241,746 $ 1,786,630 $ 6,313,758 $ 1,858,096 $ 6,386,476 $ 1,932,419 $ 6,152,084 $ 2,009,716 $ 6,152,172 $ 2,066,421 $ 6,223,019 $ 2,149,078 $ 6,294,564 2,235,041 Operating Profit $ 5,712,000 $ 5,726,280 $ 5,738,275 $ 5,074,592 $ 4,499,473 $ 4,452,879 $ 4,455,116 $ 4,455,662 $ 4,454,057 $ 4,142,368 $ 4,085,751 $ 4,073,941 $ 4,059,523 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 70,000 $ 70,000 $ 70,000 Depreciation Boat Refurbishing #1 Refurbishing #2 Refurbishing #3 Refurbishing #4 Taxable Income (without cost of capital) Income Tax Net Income (without cost of capital) $ $ $ 3,714,592 $ - $ 3,714,592 $ 3,139,473 $ - $ 3,139,473 $ 3,032,879 $ - $ 3,032,879 $ 3,035,116 $ - $ 3,035,116 $ 3,035,662 $ - $ 3,035,662 $ 3,034,057 $ - $ 3,034,057 $ 2,722,368 $ - $ 2,722,368 $ 2,655,751 $ - $ 2,655,751 $ 2,643,941 $ - $ 2,643,941 $ 2,629,523 2,629,523 500,000 $ 515,000 $ 530,450 $ 546,364 $ 562,754 $ 579,637 $ 597,026 $ 614,937 $ 633,385 $ 652,387 $ 671,958 $ 692,117 $ 712,880 0 $ 4,280,611.87 11.30% 9% 3,900,000 $ 7,800,000 $ $ 39,000,000 $ 1,360,000 $ 39,000,000 $ 2,720,000 $ 39,000,000 $ 4,080,000 $ 39,000,000 $ 5,440,000 $ 39,000,000 $ 6,800,000 $ $ $ 39,000,000 8,160,000 300,000 60,000 $ FREE CASH FLOWS Assumed WACC rate for NPV calculation 4,378,275 $ - $ 4,378,275 $ $ Total Assets (including all net working capital) NPV IRR 4,366,280 $ - $ 4,366,280 $ $ PARTIAL BALANCE SHEET (WITHOUT LIABILITIES AND EQUITY) Assets (including all net working capital) Net Working Capital (Inventory, A/R, A/P) Fixed Assets Boat Less: Accumulated Depreciation Refurbishing #1 Less: Accumulated Depreciation Refurbishing #2 Less: Accumulated Depreciation Refurbishing #3 Less: Accumulated Depreciation Refurbishing #4 Less: Accumulated Depreciation 4,352,000 $ - $ 4,352,000 $ 3,900,000 $ 7,800,000 $ 38,140,000 $ 36,795,000 $ 35,450,450 $ 34,106,364 $ 32,762,754 $ 31,659,637 $ 30,257,026 $ 5,711,280 4 5,722,825 5 5,058,679 6 4,483,082 7 4,435,996 8 4,437,726 9 (3,900,000) 1 (3,900,000) 2 (25,988,000) 3 $ $ $ $ 39,000,000 9,520,000 300,000 120,000 $ $ $ $ 39,000,000 10,880,000 300,000 180,000 $ $ $ $ 28,854,937 $ 4,437,752 10 39,000,000 12,240,000 300,000 240,000 $ $ $ $ 27,453,385 $ 4,435,608 11 39,000,000 13,600,000 300,000 300,000 $ $ $ $ $ $ 26,052,387 $ 4,123,366 12 39,000,000 14,960,000 300,000 300,000 350,000 70,000 $ $ $ $ $ $ 24,991,958 $ 4,066,179 13 39,000,000 16,320,000 300,000 300,000 350,000 140,000 $ $ $ $ $ $ 39,000,000 17,680,000 300,000 300,000 350,000 210,000 23,582,117 $ 22,172,880 4,053,782 14 4,038,760 15 16 12/31/2016 $ $ $ 17 12/31/2017 18 12/31/2018 19 12/31/2019 20 12/31/2020 21 12/31/2021 22 12/31/2022 23 12/31/2023 24 12/31/2024 25 12/31/2025 26 12/31/2026 27 12/31/2027 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 0.00% 18,243 $ 349 6,660 $ 14,762 $ 349 6,927 $ 14,932 $ 349 7,204 $ 15,104 $ 349 7,492 $ 15,278 $ 349 7,792 $ 15,454 $ 349 8,103 $ 14,654 $ 349 8,427 $ 14,823 $ 349 8,764 $ 14,993 $ 349 9,115 $ 15,166 $ 349 9,480 $ 15,341 $ 349 9,859 $ 13,488 349 10,253 $ 750,000 $ 850,000 $ $ 6,366,807 $ 2,324,443 $ 5,151,938 $ 2,417,420 $ 5,211,268 $ 2,514,117 $ 5,271,296 $ 2,614,682 $ 5,332,022 $ 2,719,269 $ 5,393,446 $ 2,828,040 $ 5,114,246 $ 2,941,161 $ 5,173,227 $ 3,058,808 $ 5,232,557 $ 3,181,160 $ 5,292,934 $ 3,308,407 $ 5,354,009 $ 3,440,743 $ 4,707,312 3,578,373 $ 4,042,364 $ 2,734,518 $ 2,697,151 $ 2,656,614 $ 2,612,753 $ 2,565,406 $ 2,173,085 $ 2,114,419 $ 2,051,397 $ 1,984,527 $ 1,913,266 $ 1,128,939 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 70,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ $ 170,000 $ 170,000 $ 170,000 $ 170,000 $ 170,000 70,000 $ 150,000 $ $ $ 2,612,364 $ - $ 2,612,364 $ 1,304,518 $ - $ 1,304,518 $ 1,187,151 $ - $ 1,187,151 $ 1,146,614 $ - $ 1,146,614 $ 1,102,753 $ - $ 1,102,753 $ 1,055,406 $ - $ 1,055,406 $ 663,085 $ - $ 663,085 $ 584,419 $ - $ 584,419 $ 521,397 $ - $ 521,397 $ 454,527 $ - $ 454,527 $ 383,266 $ - $ 383,266 $ (401,061) (401,061) $ 734,267 $ 756,295 $ 778,984 $ 802,353 $ 826,424 $ 851,217 $ 876,753 $ 903,056 $ 930,147 $ 958,052 $ 986,793 $ 1,016,397 $ $ $ $ $ $ 39,000,000 19,040,000 300,000 300,000 350,000 280,000 $ 20,764,267 $ 4,020,978 16 $ $ $ $ $ $ 39,000,000 20,400,000 300,000 300,000 350,000 350,000 $ $ $ $ $ $ $ $ 19,356,295 $ 2,712,490 17 39,000,000 21,760,000 300,000 300,000 350,000 350,000 750,000 150,000 $ $ $ $ $ $ $ $ 18,618,984 $ 2,674,462 18 39,000,000 23,120,000 300,000 300,000 350,000 350,000 750,000 300,000 $ $ $ $ $ $ $ $ 39,000,000 24,480,000 300,000 300,000 350,000 350,000 750,000 450,000 $ $ $ $ $ $ $ $ 39,000,000 25,840,000 300,000 300,000 350,000 350,000 750,000 600,000 $ $ $ $ $ $ $ $ 39,000,000 27,200,000 300,000 300,000 350,000 350,000 750,000 750,000 $ $ $ $ $ $ $ $ $ $ 39,000,000 28,560,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 170,000 $ $ $ $ $ $ $ $ $ $ 39,000,000 29,920,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 340,000 $ $ $ $ $ $ $ $ $ $ 17,132,353 $ 15,646,424 $ 14,161,217 $ 12,676,753 $ 12,023,056 $ 10,520,147 $ 2,633,245 19 2,588,682 20 2,540,613 21 2,147,548 22 2,088,117 23 2,024,305 24 39,000,000 31,280,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 510,000 $ $ $ $ $ $ $ $ $ $ 39,000,000 32,640,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 680,000 $ $ $ $ $ $ $ $ $ $ 39,000,000 34,000,000 300,000 300,000 350,000 350,000 750,000 750,000 850,000 850,000 9,018,052 $ 7,516,793 $ 6,016,397 1,956,623 25 1,884,525 26 1,099,336 27 OCEAN CARRIERS FORECAST OVERALL ASSUMPTIONS ABOUT THE BOAT Cost of Boat (paid over 3 years) Inflation Rate - Operating Costs Inflation Rate - Working Capital $ Year Date 39,000,000 4.00% 3.00% 0 1/1/2001 1 12/31/2001 2 12/31/2002 Average Depreciation Years - Boat Average Depreciation Years - Refurbishings Salvage Value - Boat Average Tax Rate 3 12/31/2003 $ Daily Revenue ("Daily Hire Rate") Days Hired (per year) Daily Operating Costs $ $ 4 12/31/2004 5 12/31/2005 6 12/31/2006 7 12/31/2007 8 12/31/2008 9 12/31/2009 10 12/31/2010 11 12/31/2011 12 12/31/2012 13 12/31/2013 14 12/31/2014 15 12/31/2015 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 $ 0.00% 25 5 5,000,000 0.00% 20,000 $ 357 4,000 $ 20,200 $ 357 4,160 $ 20,400 $ 357 4,326 $ 18,714 $ 357 4,499 $ 17,283 $ 357 4,679 $ 17,481 $ 353 4,867 $ 17,682 $ 353 5,061 $ 17,886 $ 353 5,264 $ 18,092 $ 353 5,474 $ 17,428 $ 353 5,693 $ 17,628 $ 349 5,921 $ 17,831 $ 349 6,158 $ 18,036 349 6,404 Every 5 Year Refurbishing Costs $ 300,000 $ 350,000 PARTIAL INCOME STATEMENT (WITHOUT COST OF CAPITAL) Revenue Operating Costs $ $ 7,140,000 $ 1,428,000 $ 7,211,400 $ 1,485,120 $ 7,282,800 $ 1,544,525 $ 6,680,898 $ 1,606,306 $ 6,170,031 $ 1,670,558 $ 6,170,793 $ 1,717,914 $ 6,241,746 $ 1,786,630 $ 6,313,758 $ 1,858,096 $ 6,386,476 $ 1,932,419 $ 6,152,084 $ 2,009,716 $ 6,152,172 $ 2,066,421 $ 6,223,019 $ 2,149,078 $ 6,294,564 2,235,041 Operating Profit $ 5,712,000 $ 5,726,280 $ 5,738,275 $ 5,074,592 $ 4,499,473 $ 4,452,879 $ 4,455,116 $ 4,455,662 $ 4,454,057 $ 4,142,368 $ 4,085,751 $ 4,073,941 $ 4,059,523 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 $ $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 60,000 $ 1,360,000 $ 1,360,000 $ 1,360,000 70,000 $ 70,000 $ 70,000 Depreciation Boat Refurbishing #1 Refurbishing #2 Refurbishing #3 Refurbishing #4 Taxable Income (without cost of capital) Income Tax Net Income (without cost of capital) $ $ $ 3,714,592 $ - $ 3,714,592 $ 3,139,473 $ - $ 3,139,473 $ 3,032,879 $ - $ 3,032,879 $ 3,035,116 $ - $ 3,035,116 $ 3,035,662 $ - $ 3,035,662 $ 3,034,057 $ - $ 3,034,057 $ 2,722,368 $ - $ 2,722,368 $ 2,655,751 $ - $ 2,655,751 $ 2,643,941 $ - $ 2,643,941 $ 2,629,523 2,629,523 500,000 $ 515,000 $ 530,450 $ 546,364 $ 562,754 $ 579,637 $ 597,026 $ 614,937 $ 633,385 $ 652,387 $ 671,958 $ 692,117 $ 712,880 0 $ 922,892.84 9.62% 9% 3,900,000 $ 7,800,000 $ $ 39,000,000 $ 1,360,000 $ 39,000,000 $ 2,720,000 $ 39,000,000 $ 4,080,000 $ 39,000,000 $ 5,440,000 $ 39,000,000 $ 6,800,000 $ $ $ 39,000,000 8,160,000 300,000 60,000 $ FREE CASH FLOWS Assumed WACC rate for NPV calculation 4,378,275 $ - $ 4,378,275 $ $ Total Assets (including all net working capital) NPV IRR 4,366,280 $ - $ 4,366,280 $ $ PARTIAL BALANCE SHEET (WITHOUT LIABILITIES AND EQUITY) Assets (including all net working capital) Net Working Capital (Inventory, A/R, A/P) Fixed Assets Boat Less: Accumulated Depreciation Refurbishing #1 Less: Accumulated Depreciation Refurbishing #2 Less: Accumulated Depreciation Refurbishing #3 Less: Accumulated Depreciation Refurbishing #4 Less: Accumulated Depreciation 4,352,000 $ - $ 4,352,000 $ 3,900,000 $ 7,800,000 $ 38,140,000 $ 36,795,000 $ 35,450,450 $ 34,106,364 $ 32,762,754 $ 31,659,637 $ 30,257,026 $ 5,711,280 4 5,722,825 5 5,058,679 6 4,483,082 7 4,435,996 8 4,437,726 9 (3,900,000) 1 (3,900,000) 2 (25,988,000) 3 $ $ $ $ 39,000,000 9,520,000 300,000 120,000 $ $ $ $ 39,000,000 10,880,000 300,000 180,000 $ $ $ $ 28,854,937 $ 4,437,752 10 39,000,000 12,240,000 300,000 240,000 $ $ $ $ 27,453,385 $ 4,435,608 11 39,000,000 13,600,000 300,000 300,000 $ $ $ $ $ $ 26,052,387 $ 4,123,366 12 39,000,000 14,960,000 300,000 300,000 350,000 70,000 $ $ $ $ $ $ 24,991,958 $ 4,066,179 13 39,000,000 16,320,000 300,000 300,000 350,000 140,000 $ $ $ $ $ $ 39,000,000 17,680,000 300,000 300,000 350,000 210,000 23,582,117 $ 22,172,880 4,053,782 14 4,038,760 15 16 12/31/2016 17 12/31/2017 25 5 5,000,000 $ 0.00% 25 5 5,000,000 0.00% $ 18,243 $ 349 6,660 $ 14,762 349 6,927 $ $ 6,366,807 $ 2,324,443 $ 5,151,938 2,417,420 $ 4,042,364 $ 2,734,518 $ 1,360,000 $ 1,360,000 $ 70,000 $ 70,000 $ $ $ 2,612,364 $ - $ 2,612,364 $ 1,304,518 1,304,518 $ 734,267 $ 756,295 $ $ $ $ $ $ $ $ 39,000,000 19,040,000 300,000 300,000 350,000 280,000 $ $ $ $ $ $ 39,000,000 20,400,000 300,000 300,000 350,000 350,000 $ 20,764,267 $ 19,356,295 4,020,978 16 2,712,490 17