You are the CEO (Chief Executive Officer) of a ship company which is investing an amount, I, now (t=0) in a 5-year project. The number of ships manufactured in each of the next 5 years is S. More information is provided in the table below.

Item Annual amount at the end of each of the next 5 years (t=1, t=2, t=3, t=4 and t=5)

After-Tax Accounting Income $ (5S 200) million

Net Cash Flow $ (5S 50) million

After-Tax Accounting Income = Net Profits

Depreciation method: straight-line

No working capital will be required during this 5-year project

Salvage value at the end of the project is zero.

Determine the amount of depreciation in Year 1. A. $ 50 million B. $ 75 million C. $ 100 million D. $ 150 million E. $ 200 million

Determine the amount of initial investment, I, at t = 0. A. $ 550 million B. $ 600 million C. $ 650 million D. $ 700 million E. $ 750 million

Your ship companys cost of capital is 8% p.a. The annuity factor from the Finance perspective is closest to A. 4.2 B. 4.0 C. 3.8 D. 3.6 E. 3.4

Determine the breakeven number of ships, S, from the Finance perspective. Hint: Use Total Cash Flow figures. A. 43.5 ships B. 45.5 ships C. 47.5 ships D. 49.5 ships E. 51.5 ships

Determine the breakeven number of ships, S, from the Accounting perspective. Hint: Use After-Tax Accounting Income figures. A. 38 ships B. 40 ships C. 42 ships D. 44 ships E. 46 ships

From the Finance perspective, what is the minimum number of ships that must be manufactured by your company in order to breakeven? A. 44 ships B. 46 ships C. 48 ships D. 50 ships E. 52 ships

Which of the following statements is correct?

A. As the companys CEO, you prefer the Finance method because only 10 ships are needed to breakeven.

B. As the companys CEO, you prefer the Accounting method because only 30 ships are needed to breakeven.

C. The Finance method is always better than the Accounting method.

D. The Accounting method is always better than the Finance method. E. None of the above statements is correct.