Problem 2

Halcyon Lines is considering the purchase of a new bulk carrier for $10 million. The forecasted revenues are $6 million a year and the operating costs are $4 million a year. A major refit costing $3 million will be required after both the fifth and the tenth years. After 15 years, the ship is expected to be sold for scrap for $2 million. If the discount rate is 8%, what is the ships NPV?