case study "Ocean Carriers"

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case study "Ocean Carriers" and answer the following questions:

• Should Ms. Linn purchase the $39M capesize?
  • Calculate free cashflows for the scenario where the company follows its standard policy of scrapping the ship at the end of the 15th year.
  • Discount these free cashflows at a 11% discount rate, and calculate the present value (value created) of purchasing the capsize.
  • You can assume a 25% corporate tax rate in your calculation
• Recalculate the free cashflows for the scenario where the company operates the ship until the end of the ship's useful operating life.
  • Discount these free cashflows at the same 11% discount rate, and calculate the present value.
  • If the company purchases the capsize, is it better for the company to scrap the ship after 15 years or operate it for its useful operating life?