Atlantic Marine Transport Corporation is considering the purchase of a new bulk carrier for $9 million. The forecasted revenues are $5.5 million a year and operating costs are $4 million. A major refit costing $2 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $1 million.

a. What is the NPV if the opportunity cost of capital is 10%? (10 points)

b. Should the company accept the purchase of the carrier? (10 points)