Arial 10 AA il Wrap Text General Paste B I U w Merge & Center - % 00 C23 x fx B D E F G H 2 3 After successfully earning a MBA, Lincoln alumni decide to form their own 4 cruise ship company based out of San Francisco. Lincoln Alumni cruises offers luxury trips along the Pacific Coast 5 and to the Hawaiian Islands. They are debating what to do with their existing ship, S.S. 6 Mission Bay which was built 15 years ago for $90 M and is now fully depreciated. To replace the Mission Bay 7 would cost $180M and its current market value is $150M. Lincoln Alumni Cruises' cost of capital is 15%. 8 9 Lincoln Alumni, dusting off some accounting materials, were able to determine the operating costs 10 for a two-week cruise to Alaska, which would be a change from a three week cruise from travelling down to 11 Guatemala. Here are their estimates (based on 2,000 passengers per cruise and 25 cruises per year): 12 13 14 PER CRUISE 15 Variable Costs Fixed Costs 16 Labor 750,000 150,000 17 Food 750,000 75,000 18 Fuel 650,000 19 Portfees and services 125.000 20 Marketing, ads, promotion 350,000 21 Supplies 500,000 150,000 22 Totals 2,000,000 1,500,000 23 24 25 26 27 a. Assuming that the two-week Alaskan cruise the priced at $2,000 per passenger, please calculate 28 the break-even number of passengers per cruise based on the data above. 29 30 b. What do the Lincoln Alumni need to consider beyond these estimates, and if they included this consideration, 31 what would happen to the break-even point? Would there be an issue if the max capacity of the ship was 2000 passengers? 32 33 HINT: Please calculate the OPPORTUNITY COST and compare against its capacity 35