Halcyon Lines is conisdering the purchase of a new bulk carrier for $8.7 million. The forecasted revenues are $5.7 million a year and operating costs are $4.7 million. A major refit costing $2.7 million will be required after both the fifth and tenth years. After 15, years, the ship is expected to be sold for scrap at $2.2 million.

a. What is the NPV if the opportunity cost of capital is 12%?

b. Halcyon could finance the ship by borrowing the entire investment at an interest rate of 4.5%. Will this borrowing opportunity affect your calcuation of NPV?

YES or NO. (Please select one answer and explain your logic)