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Please help and answer all parts, thank you Seattle Clipper Inc. is thinking about a new project: organizing cruises to Hawaii. Before going ahead with
Please help and answer all parts, thank you
Seattle Clipper Inc. is thinking about a new project: organizing cruises to Hawaii. Before going ahead with this project, the manager wants to study its feasibility and hires a consulting rm for a market study. After considering the project riskiness, he estimates an opportunity cost of capital of 10%. Here is some more information the consulting company provided: - They estimate that Seattle Clipper can sell 150 tickets per year for Hawaii cruises every year for the next 10 years. Each ticket will have a price of $1,600. - The consulting firm predicts that the newly organized cruises will reduce the number of clients for the Alaska cruise, an older and very popular cruise, and thus its revenues by 10%. This older cruise has traditionally brought yearly revenues of $150,000. - Three (3) new guides will be hired to take charge exclusively of cruises to Hawaii. The guides are, on average, paid $28,000 per year each. - The company will have to invest in a brand new boat. The purchasing price will be $650,000. This expense will be depreciated over 10 years with the straight-line method. In 10 years, the company will stop its operations in Hawaii. At that point, The|boat will have a resale value of $350,000. Seattle Clipper's marginal tax rate is 35%. The consulting rm is requesting a payment of $10,000 for their services, due by the end of this year. Considering its NPV and IRR, is this project worth undertaking? Please show your calculationsStep by Step Solution
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