Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Carnival Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Glory, can hold

image text in transcribed
Carnival Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Glory, can hold up to 3,000 passengers and cost $510 million to build. Assume the following additional information: *The average occupancy rate for the new ship is estimated to be 80% of capacity. There will be 300 cruise days per year *The variable expenses per passenger are estimated to per cruise day be $75 The revenue per passenger is expected to be $310 per cruise day *The fixed expenses for running the ship, other than depreciation, are estimated to be $78,000,000 per year The ship has a service life of 10 years, with a salvage value of $85, 000,000 at the end of 10 years. a. Determine the annual net cash flow from operating the cruise ship. b. Determine the net present value of this investment, assuming a 12% minimum. C. Assume that Carnival decided to increase its price so that the revenue increased to $320 per passenger per cruise day. Would this allow Carnival to earn a 15% rate of return on the cruise ship investment assuming no change in any of the other assumptions? Use the present value tables from your textbook or from another source

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

CIA Part 1 Essentials Of Internal Auditing 2022

Authors: MUHAMMAD ZAIN

1st Edition

B09PHFC28N, 979-8794951356

More Books

Students also viewed these Accounting questions