eBook Calculator Print Item Net Present Value Method for a Service Company Opulence Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Bellwether, can hold up to 3,000 passengers and it can cost $600 million to build. Assume the following additional Information: There will be 300 cruise days per year operated at a full capacity of 3,000 passengers. The variable expenses per passenger are estimated to be $95 per cruise day. The revenue per passenger is expected to be $475 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $88,920,000 per year. The ship has a service life of 10 years, with a residual value of $100,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.870 0.833 0.890 0.756 0.694 0.840 0.658 0.572 0.792 0.826 0.751 0.683 0.621 0.564 0.513 0.497 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.705 0.432 0.376 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.665 0.627 0.592 0.467 0.424 0.284 0.247 0.558 eBook Calculator E Print Item Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.353 2.991 4.917 4.355 4.111 3.785 3.326 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 7.360 6.145 5.650 5.019 4.192 a. Determine the annual net cash flow from operating the cruise ship. Revenues $ 403,920,000 X Variable expenses 166,320,000 Fixed expenses (other than depreciation) 80,000,000 X Annual net cash flow 157,600,000 b. Determine the net present value of this investment, assuming a 10% minimum rate of return. Use the present value tables provided has T able Mind Manian eBook Calculator Print Item 8 6 .210 5.335 4.968 4.487 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 107.360 6.145 5.6505.019 4.192 a. Determine the annual net cash flow from operating the cruise ship. Revenues 403,920,000 Variable expenses 166,320,000 Fixed expenses (other than depreciation) 80,000,000 X Annual net cash flow $ 157,600,000 X b. Determine the net present value of this investment, assuming a 10% minimum rate of return. Use the present value tables provided above. If required, round to the nearest whole dollar. Present value of annual net cash flows $ 890,440,000 X Present value of residual value 45,080,000 X Total present value 835,520,000 X Amount to be invested 750,000,000 X Net present value 185,520,000 x Feedback Check My Work Cashtract the variable avnanese and
