Problem 9-4 Steering Cruise Line is considering the acquisition of a new ship that will cost $199,900,000. In this regard, the president of the company asked the CFO to analyze cash flows associated with operating the ship under two alternative itineraries: Itinerary 1, Caribbean Winter/Alaska Summer and Itinerary 2, Caribbean Winter/Eastern Canada Summer. The CFO estimated the following cash flows, which are expected to apply to each of the next 15 years: Caribbean/ Alaska $118,910,000 Caribbean/Eastern Canada $103,910,000 Net revenue Less: Direct program expenses Indirect program expenses Nonoperating expenses Add back depreciation Cash flow per year (24,950,000) (19,950,000) (21,050,000) 115,000,000 $167,960,000 (23,860,000) (19,950,000) (21,050,000) 115,000,000 $154,050,000 Click here to view factor tables For each of the itineraries, calculate the present values of the cash flows using required rates of return of both 8 and 12 percent. Assume a 15-year time horizon. (Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answer to 0 decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Present value at 8% Present value at 12% Caribbean/Alaska Caribbean/Eastern Canada Should the company purchase the ship with either or both required rates of return? The company should purchase the ship with of return. LINK TO TEXT Focusing on a 8 percent required rate of return, what would be the opportunity cost to the company of using the ship in a Caribbean/Eastern Canada itinerary rather than a Caribbean/Alaska itinerary? Focusing on a 8 percent required rate of return, what would be the opportunity cost to the company of using the ship in a Caribbean/Eastern Canada itinerary rather than a Caribbean/Alaska itinerary? Opportunity cost LINK TO TEXT Question Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWER Problem 9-4 Steering Cruise Line is considering the acquisition of a new ship that will cost $199,900,000. In this regard, the president of the company asked the CFO to analyze cash flows associated with operating the ship under two alternative itineraries: Itinerary 1, Caribbean Winter/Alaska Summer and Itinerary 2, Caribbean Winter/Eastern Canada Summer. The CFO estimated the following cash flows, which are expected to apply to each of the next 15 years: Caribbean/ Alaska $118,910,000 Caribbean/Eastern Canada $103,910,000 Net revenue Less: Direct program expenses Indirect program expenses Nonoperating expenses Add back depreciation Cash flow per year (24,950,000) (19,950,000) (21,050,000) 115,000,000 $167,960,000 (23,860,000) (19,950,000) (21,050,000) 115,000,000 $154,050,000 Click here to view factor tables For each of the itineraries, calculate the present values of the cash flows using required rates of return of both 8 and 12 percent. Assume a 15-year time horizon. (Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answer to 0 decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Present value at 8% Present value at 12% Caribbean/Alaska Caribbean/Eastern Canada Should the company purchase the ship with either or both required rates of return? The company should purchase the ship with of return. LINK TO TEXT Focusing on a 8 percent required rate of return, what would be the opportunity cost to the company of using the ship in a Caribbean/Eastern Canada itinerary rather than a Caribbean/Alaska itinerary? Focusing on a 8 percent required rate of return, what would be the opportunity cost to the company of using the ship in a Caribbean/Eastern Canada itinerary rather than a Caribbean/Alaska itinerary? Opportunity cost LINK TO TEXT Question Attempts: 0 of 3 used