Pacific Marine Transport Corporation is considering the purchase of a new bulk carrier for $10 million. The forecasted revenues are $5.5 million a year and operating costs are $4 million. A major refit costing $2 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $1.5 million.

1. What is the NPV if the opportunity cost of capital is 8%? (10 points)

2. Should the company accept the purchase of the carrier? (10 points)