Question $4$:

Tanker Shipping wants to invest in a new ship. Given the following, calculate the Net Present Value:

CAPEX in Year $0$

$$44$m

EBIT Year $1$ Year $10$

$$6$m

Depreciation $($straight line$)$

$10\%$ pa

Scrap Value Year $10$

$$4$m

Tax Rate

$30\%$

Interest Rate

$7\%$

WACC

$12\%$

Hint:

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Calculate NOPAT $=$ EBIT x $(1$ Tax rate$)$

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Assume that the cashflows are earned at the end of the year $($I$.$e$.$ discount using full years$)$

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There are no working capital implications.

Calculate the NPV