Need help for corporate finance homework:

Below is the question:

Below is the exhlibit:

For this case, we need to solve:

a. Benchmark Valuation? b. What if tax rate is 0%? c. What if scrap the ship at the end of year 15? In Year 15, - no special survey is required - net working capital will be zero at year 15 - Depreciation schedule is still 25 years - Year 15 is the ship age. The event year is 17. d. Perform the sensitivity. scenario, and break-even analysis that you feel important.

Please help me. Will definitely give a lke for you.

Atlantic-Pacific Carriers In January 2016, Mary Linn, Vice President of Finance for Atlantic-Pacific Carriers, a shipping company with offices in New York and Hong Kong, was evaluating a proposed lease of a ship for a three-year period, beginning in early 2018. The customer was eager to finalize the contract to meet his own commitments and offered very attractive terms. No ship in Atlantic-Pacific Carrier's current fleet met the customer's requirements. Linn, therefore, had to decide whether Atlantic-Pacific Carriers should immediately commission a new capesize carrier that would be completed two years hence and could be leased to the customer. Ship Operations Atlantic-Pacific Carriers Inc. owned and operated capesize dry bulk carriers that mainly carried iron ore worldwide. This type of vessel ranged in size from 80,000 deadweight tons to 210,000 deadweight tons of cargo carrying capacity. Capesize carriers were too large to transit the Panama Canal and therefore had to sail around Cape Horn to travel between the Atlantic and Pacific Oceans. In January 2016, there were 553 capesizes in service in the world. Atlantic-Pacific Carriers' vessels were mostly chartered on a time charter basis for a period such as one year, three years, or five years, although the spot charter market was used on occasion. The company that chartered the ship was called the charterer. The charterer paid Atlantic-Pacific Carriers a daily hire rate for the entire length of the contract, determined what cargo the vessel carried, and controlled where the vessel loaded and unloaded. The company, in turn, supplied a seaworthy vessel that complied with international regulations and manned the vessel with a fully qualified and certified crew. Operations also included ensuring adequate supplies and stores were onboard, supplying lubricating oils, scheduling repairs, conducting overall maintenance of the vessel, and placing all insurances for the vessel. For a new ship coming on line in early 2018, operating costs were expected to initially average $4,000 per day, and to increase annually at a rate of 1% above inflation. Charterers were not charged a daily rate for the time the vessel spent in maintenance and repair, although operating costs were still incurred. Initially, 8 days a year were scheduled for such work. The time allotted to maintenance and repairs increased to 12 days per year after five years of operation, and to 16 days a year for ships older than ten years. The company had a policy of not operating vessels older than 15 years. Every five years, international regulations mandated that a special survey be undertaken to ensure seaworthiness as defined by international regulations. By the fifteenth year, the maintenance required to comply with the special surveys was very costly. Exhibit 1 shows the capital expenditures anticipated in preparation for the special surveys. These outlays were considered capital expenditures, which would each be depreciated Linn was also confident that the charterer would honor his proposed contract with Atlantic-Pacific Carriers if the company agreed to the terms. While there is always a risk that the charterer would stop paying before the end of the contract or terminate the contract early, Linn considered that the risk was small. Atlantic-Pacific Carriers had long established relationships with its charterers and only contracted with reputable charterers. The proposed contract, though, was only for three years, and it was Linn's responsibility to decide if future market conditions warranted the considerable investment in a new ship. A B D E F G H 1 Exhibit 1 Capital Expenditures Anticipated in Preparation for Special Surveys 2 3 2022 2027 2032 2037 2042 4 5 300,000 350,000 750,000 850,000 1,250,000 6 7 Source: Company estimates 8 5 25 20 A E C D E 1 Exhibit 2 Capesize fleet by age category as of December 2015 2 3 35 4 5 30 29 6 7 8 20 9 17 10 15 11 11 12 10 13 14 15 16 Over 24 17 20 to 20 15 to 19 10 to 14 5 to 9 Years Under 5 On Order for Years Years Years Y cars Years 2016 18 19 20 21 22 23 Source: Company estimates Millions of Deadweight Tons il G A 1 Exhibit 3 B D E F Current order book for dry bulk capesizes by delivery date N 2017 2018 2019 33 21 9 3 2016 4 5 Number of vessels 63 6 7 8 Source: Company documents 9 10 A B D E F 1 Exhibit 4 Daily Hire Rate Adjustment Factor for Dry Bulk Capesizes Based on Age of Vessel 2 3 Over 24 years 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years 4 5 0.65 0.75 0.8 1 1.05 1.15 6 7 8 Source: Company estimates 9 10 11 B D E F G H 1 Exhibit 5 Worldwide Iron Ore Vessel Shipments, Fleet Size and Average Daily Hire Rates for Capesize Charters, 2009-2016 2 3 2009 2010 2011 2012 2013 2014 2015 2016E 4 5 Iron ore vessel shipments 375 397 385 424 420 410 440 436 6 7 Fleet size NA NA NA 540 523 523 552 612 8 9 Avg. spot rate $16,851 $20,149 $11,730 $14,794 $10,105 $9,427 $22,575 10 11 Avg. 3-yr charter rate $18,250 $18,544 $14,079 $16,063 $13,076 $12,626 $15,344 12 13 14 Source: Company documents 15 16 G H J Adjustment Factor for Hire Rate Adjusted Daily Hire Rate Expected Daily Hire Rate % Growth A B D E F 1 Exhibit 6 Forecasted Daily Time Charter Rates for New Capesize Vessel 2 Iron Ore Shipments Avg Daily Charter 3 Age of Ship Event Year Calendar Year (Millions of Tons) % Growth Rate 4 5 0 2015 440 7.30% 15,344 6 1 2016 436 -0.90% 14,747 7 2 2017 445 2.00% 15,072 8 1 3 2018 454 2.00% 15,403 9 2 4 2019 463 2.00% 15,742 10 3 5 2020 472 2.00% 16,088 11 4 6 2021 479 1.50% 16,273 12 5 7 2022 486 1.50% 16,460 13 6 8 2023 493 1.50% 16,650 14 7 9 2024 501 1.50% 16,841 15 8 10 2025 508 1.50% 17,035 16 9 11 2026 516 1.50% 17,231 17 10 12 2027 524 1.50% 17,429 18 11 13 2028 532 1.50% 17,629 19 12 14 2029 540 1.50% 17,832 20 13 15 2030 548 1.50% 18,037 21 14 16 2031 556 1.50% 18,245 22 15 17 2032 564 1.50% 18,454 23 16 18 2033 573 1.50% 18,667 24 17 19 2034 581 1.50% 18,881 25 18 20 2035 590 1.50% 19,098 26 19 21 2036 599 1.50% 19,318 27 20 22 2037 608 1.50% 19,540 28 21 23 2038 617 1.50% 19,765 29 22 24 2039 626 1.50% 19,992 30 23 25 2040 636 1.50% 20,222 31 24 26 2041 645 1.50% 20,455 32 25 27 2042 655 1.50% 20,690 33 4 Source: Company documents 21.50% -3.90% 2.20% 2.20% 2.20% 2.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.15 1.15 1.15 1.15 1.05 1.05 1.05 1.05 1.05 1.00 1.00 1.00 17,713 18,103 18,501 18,714 17,283 17,481 17,682 17,886 18,092 17,428 17,628 17,831 18,036 18,243 14,762 14,932 15,104 15,278 15,454 14,654 14,823 1.00 1.00 20,000 20,200 20,400 18,714 17,283 17,481 17,682 17,886 18,092 17,428 17,628 17,831 18,036 18,243 14,762 14,932 15,104 15,278 15,454 14,654 14,823 14,993 15,166 15,341 13,448 0.80 0.80 0.80 0.80 0.80 0.75 14,993 0.75 0.75 0.75 0.75 0.65 15,166 15,341 13,448 Atlantic-Pacific Carriers In January 2016, Mary Linn, Vice President of Finance for Atlantic-Pacific Carriers, a shipping company with offices in New York and Hong Kong, was evaluating a proposed lease of a ship for a three-year period, beginning in early 2018. The customer was eager to finalize the contract to meet his own commitments and offered very attractive terms. No ship in Atlantic-Pacific Carrier's current fleet met the customer's requirements. Linn, therefore, had to decide whether Atlantic-Pacific Carriers should immediately commission a new capesize carrier that would be completed two years hence and could be leased to the customer. Ship Operations Atlantic-Pacific Carriers Inc. owned and operated capesize dry bulk carriers that mainly carried iron ore worldwide. This type of vessel ranged in size from 80,000 deadweight tons to 210,000 deadweight tons of cargo carrying capacity. Capesize carriers were too large to transit the Panama Canal and therefore had to sail around Cape Horn to travel between the Atlantic and Pacific Oceans. In January 2016, there were 553 capesizes in service in the world. Atlantic-Pacific Carriers' vessels were mostly chartered on a time charter basis for a period such as one year, three years, or five years, although the spot charter market was used on occasion. The company that chartered the ship was called the charterer. The charterer paid Atlantic-Pacific Carriers a daily hire rate for the entire length of the contract, determined what cargo the vessel carried, and controlled where the vessel loaded and unloaded. The company, in turn, supplied a seaworthy vessel that complied with international regulations and manned the vessel with a fully qualified and certified crew. Operations also included ensuring adequate supplies and stores were onboard, supplying lubricating oils, scheduling repairs, conducting overall maintenance of the vessel, and placing all insurances for the vessel. For a new ship coming on line in early 2018, operating costs were expected to initially average $4,000 per day, and to increase annually at a rate of 1% above inflation. Charterers were not charged a daily rate for the time the vessel spent in maintenance and repair, although operating costs were still incurred. Initially, 8 days a year were scheduled for such work. The time allotted to maintenance and repairs increased to 12 days per year after five years of operation, and to 16 days a year for ships older than ten years. The company had a policy of not operating vessels older than 15 years. Every five years, international regulations mandated that a special survey be undertaken to ensure seaworthiness as defined by international regulations. By the fifteenth year, the maintenance required to comply with the special surveys was very costly. Exhibit 1 shows the capital expenditures anticipated in preparation for the special surveys. These outlays were considered capital expenditures, which would each be depreciated Linn was also confident that the charterer would honor his proposed contract with Atlantic-Pacific Carriers if the company agreed to the terms. While there is always a risk that the charterer would stop paying before the end of the contract or terminate the contract early, Linn considered that the risk was small. Atlantic-Pacific Carriers had long established relationships with its charterers and only contracted with reputable charterers. The proposed contract, though, was only for three years, and it was Linn's responsibility to decide if future market conditions warranted the considerable investment in a new ship. A B D E F G H 1 Exhibit 1 Capital Expenditures Anticipated in Preparation for Special Surveys 2 3 2022 2027 2032 2037 2042 4 5 300,000 350,000 750,000 850,000 1,250,000 6 7 Source: Company estimates 8 5 25 20 A E C D E 1 Exhibit 2 Capesize fleet by age category as of December 2015 2 3 35 4 5 30 29 6 7 8 20 9 17 10 15 11 11 12 10 13 14 15 16 Over 24 17 20 to 20 15 to 19 10 to 14 5 to 9 Years Under 5 On Order for Years Years Years Y cars Years 2016 18 19 20 21 22 23 Source: Company estimates Millions of Deadweight Tons il G A 1 Exhibit 3 B D E F Current order book for dry bulk capesizes by delivery date N 2017 2018 2019 33 21 9 3 2016 4 5 Number of vessels 63 6 7 8 Source: Company documents 9 10 A B D E F 1 Exhibit 4 Daily Hire Rate Adjustment Factor for Dry Bulk Capesizes Based on Age of Vessel 2 3 Over 24 years 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years 4 5 0.65 0.75 0.8 1 1.05 1.15 6 7 8 Source: Company estimates 9 10 11 B D E F G H 1 Exhibit 5 Worldwide Iron Ore Vessel Shipments, Fleet Size and Average Daily Hire Rates for Capesize Charters, 2009-2016 2 3 2009 2010 2011 2012 2013 2014 2015 2016E 4 5 Iron ore vessel shipments 375 397 385 424 420 410 440 436 6 7 Fleet size NA NA NA 540 523 523 552 612 8 9 Avg. spot rate $16,851 $20,149 $11,730 $14,794 $10,105 $9,427 $22,575 10 11 Avg. 3-yr charter rate $18,250 $18,544 $14,079 $16,063 $13,076 $12,626 $15,344 12 13 14 Source: Company documents 15 16 G H J Adjustment Factor for Hire Rate Adjusted Daily Hire Rate Expected Daily Hire Rate % Growth A B D E F 1 Exhibit 6 Forecasted Daily Time Charter Rates for New Capesize Vessel 2 Iron Ore Shipments Avg Daily Charter 3 Age of Ship Event Year Calendar Year (Millions of Tons) % Growth Rate 4 5 0 2015 440 7.30% 15,344 6 1 2016 436 -0.90% 14,747 7 2 2017 445 2.00% 15,072 8 1 3 2018 454 2.00% 15,403 9 2 4 2019 463 2.00% 15,742 10 3 5 2020 472 2.00% 16,088 11 4 6 2021 479 1.50% 16,273 12 5 7 2022 486 1.50% 16,460 13 6 8 2023 493 1.50% 16,650 14 7 9 2024 501 1.50% 16,841 15 8 10 2025 508 1.50% 17,035 16 9 11 2026 516 1.50% 17,231 17 10 12 2027 524 1.50% 17,429 18 11 13 2028 532 1.50% 17,629 19 12 14 2029 540 1.50% 17,832 20 13 15 2030 548 1.50% 18,037 21 14 16 2031 556 1.50% 18,245 22 15 17 2032 564 1.50% 18,454 23 16 18 2033 573 1.50% 18,667 24 17 19 2034 581 1.50% 18,881 25 18 20 2035 590 1.50% 19,098 26 19 21 2036 599 1.50% 19,318 27 20 22 2037 608 1.50% 19,540 28 21 23 2038 617 1.50% 19,765 29 22 24 2039 626 1.50% 19,992 30 23 25 2040 636 1.50% 20,222 31 24 26 2041 645 1.50% 20,455 32 25 27 2042 655 1.50% 20,690 33 4 Source: Company documents 21.50% -3.90% 2.20% 2.20% 2.20% 2.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.15 1.15 1.15 1.15 1.05 1.05 1.05 1.05 1.05 1.00 1.00 1.00 17,713 18,103 18,501 18,714 17,283 17,481 17,682 17,886 18,092 17,428 17,628 17,831 18,036 18,243 14,762 14,932 15,104 15,278 15,454 14,654 14,823 1.00 1.00 20,000 20,200 20,400 18,714 17,283 17,481 17,682 17,886 18,092 17,428 17,628 17,831 18,036 18,243 14,762 14,932 15,104 15,278 15,454 14,654 14,823 14,993 15,166 15,341 13,448 0.80 0.80 0.80 0.80 0.80 0.75 14,993 0.75 0.75 0.75 0.75 0.65 15,166 15,341 13,448