Question 3 (THIRTY (30) marks)

In classes, we have explained the importance of cashflow projection to allow shipowners to make optimal investing and financing decisions. In compiling cashflow projection, we have to base on a series of assumptions with due consideration to different possible scenarios to analyse and appraise investment project proposal in a sensible and convincible manner. In classes, we have elaborated that it is advisable to explore and analyse the answers to the question of What if? by conducting two typical analyses in order to draw a sensible and convincible conclusion to seek the approval of investment project proposal so as to optimize the financial benefits emanated from the investment project.

(a) In your own words and understanding, elaborate and explain in details with your own clear and specific financial illustrations to demonstrate the two typical analyses that serve the purpose of answering the question of What if? (10 marks)

(b) In your own words and understanding, differentiate and explain in details the differences between the two typical analyses and how they help draw a sensible and convincible conclusion for the investment project proposal. (5 marks)

(c)(i) In your own words and understanding, discuss and explain in details the five most typical and common mistakes when making assumptions for and preparing cashflow projection for investment project proposal. (5 marks)

(c)(ii) In your own words and understanding, elaborate and explain with detailed justifications of your corresponding suggestions and solutions to resolve and deal with these five most typical and common mistakes to make more reasonable and realistic assumptions to prepare a relatively more sensible and accurate cashflow projection to analyse and appraise the investment project proposal. (10 marks)