SwiftCruz plc , a company that operates cruise liners, is considering purchasing a ready - made new liner for use in the Indian Ocean. The purchase cost of the liner is expected to be 5 0 0 m , payable immediately. The liner is expected to have a useful economic life ( UEL ) of 4 0 years, at which point it would be scrapped at a zero net cost . Capital allowances on the purchase cost of the liner are available and are calculated using the straight - line method over its UEL. The firm predicts that should the project go ahead, it could operate 2 0 trips p . a . with an average of 2 , 5 0 0 passengers per trip. In addition, the firm would expect average revenue of 3 , 0 0 0 per passenger, with the variable costs per passenger expected to be 1 , 0 0 0 . Annual scheduled maintenance and other fixed overheads would likely be 1 5 m p . a . The firm s marginal tax rate is 2 0 % , payable in the year it is incurred, and its after - tax cost of capital is 1 2 % .  

Requirement

i$.$ Calculate the NPV of the project $($assume constant figures over $40$ years$).$

Work to the nearest $0\mathrm{.}1$m$.$

ii$.$ Calculate the margin of safety $($in percentage terms$)$ in relation to the annual

scheduled maintenance and other fixed overheads. Work to the nearest

$0\mathrm{.}1$m and to the nearest $0\mathrm{.}1\%(0\mathrm{.}001).$

iii. Calculate the margin of safety $($in percentage terms$)$ in relation to the

estimated number of passengers per trip. Work to the nearest $0\mathrm{.}1$m and to

the nearest $0\mathrm{.}1\%(0\mathrm{.}001).$ Hint: try $2,000$ passengers per trip.