If Opulent Oceans proceed with the Azure Majesty project the spare parts inventory must be

increased by $$2\mathrm{.}25$ million from existing levels and purchased immediately. Having spare parts

readily available reduces the delay time between journeys. In addition to the major

refurbishment costs, the Azure Majesty will require minor maintenance of $$1\mathrm{.}58$ million per

annum. Such maintenance will take place after the return of each journey.

In order to operate the cruise ship, the NSW government require each ship to purchase a clean

water management and safety certificate to keep Sydney's water clean. This certificate will

need to be purchased immediately. Without the certificate the ship will not be allowed to

operate. Such a certificate costs $$395,000$ and lasts for a four year period. Upon expiration the

certificate must be renewed otherwise each ship will not be allowed to operate in the Sydney

harbour. The certificate is not an asset, however, it can be claimed as an operating expense in

the year in which the certificate was purchased.

Based off recent market data that you have obtained from the Global Maritime Agency, it is

projected that Azure Majesty and the bow thruster will be worth a total of $$28$ million in $5$

years' time and a total of $$24$ million in $10$ years' time. In both cases, the bow thruster

represents $10\%$ of the total quoted figures and the cruise ship represents the remaining value.

Jenny gave you a folder from the Australian Tax Office $($ATO$)$ when you first started. Under

taxation ruling $2000/18$ "Passenger ships", the effective life of cruise ships like the Azure