H F 1 Problem 9-4 Present Value and "What If Analysis 2 National Cruise Line, Inc. is considering the acquisition of a new ship that will cost $600,000,000 3. In this regard, the president of the company asked the CFO to analyze cash flows associated 4 with operating the ship under two alternative Itineraries: Itinerary t. Caribbean Winter/Alaska 5 Summer and itinerary 2 Caribbean Vinter/Eastern Canada Summer, The CFO estimated the 6 following cash flows, which are expected to apply to each of the next 15 yeats: 7 Caribbeanlalas Caribbeast 8 Easters 9 Net revenue $ 120,000,000 105,000,000 10 Less 11 Direct program expenses 125,000,000) (24,000,000) 12 Indirect program expenses (20,000,000) (20,000,000) 13 Non-operating expenses (21,000,000) (21,000,000) 14 Add back depreciation 115,000,000 115,000,000 15 Cash Flow per year $ 169,000,000 $ 155,000,000 16 17 The estimated cost of the new ship and during of expected cash flows is: 18 19 Estimated cost of new ship $ 600.000.000 20 Estimated period of cash flows in years 15 21 22 Frequired 23 a. For each of the itineraries, calculate the present values of the cash flows using required rates 24 of return of both 12 and 16% using both present value factors and separately using Excel PV 25 function. Assume a 15-year time horizon. Should the company purchase the ship with either or 26 27 Caribbeandalas 28 12% 29 30 31 32 33 34 Caribbeant Eastern Canada 35 12%. 36 37 38 16% 39 40 41 42 Caribbean/Alaska Caribbeaal Eastern Canada 43 Rate 12% 16% 12% 16% 44 Number of periods 45 Payments 46 Future value Type 48 49 PV 50 51 52 53 54 55 16%