(a)
Cash flow:
Cash flow is the monetary consideration (return or income) received by the business for its long-term capital investment.
The annual net cash flow from operating the cruise ship.
(b)
Net present value method is the method which is used to compare the initial
To calculate: The net present value of the investment.
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Chapter 26 Solutions
Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
- Net Present Value Method Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 2,300 passengers and cost $460 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,300 passengers. The variable expenses per passenger are estimated to be $70 per cruise day. The revenue per passenger is expected to be $350 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $50,232,000 per year. The ship has a service life of 10 years, with a residual value of $70,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467…arrow_forwardCarnival (CCL) has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Breeze, can hold up to 3,600 passengers, which can cost $750 million to build. Assume the following additional information: There will be 340 cruise days per year operated at a full capacity of 3,600 passengers. The variable expenses per passenger are estimated to be $100 per cruise day. The revenue per passenger is expected to be $280 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $90,000,000 per year. The ship has a service life of 10 years, with a residual value of $60,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376…arrow_forwardNet Present Value Method Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 2,300 passengers and cost $460 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,300 passengers. The variable expenses per passenger are estimated to be $85 per cruise day. The revenue per passenger is expected to be $425 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $60,996,000 per year. The ship has a service life of 10 years, with a residual value of $70,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467…arrow_forward
- O Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Bellwether, can hold up to 2,500 passengers and it can cost $500 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,500 passengers. The variable expenses per passenger are estimated to be $90 per cruise day. The revenue per passenger is expected to be $450 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $70,200,000 per year. The ship has a service life of 10 years, with a residual value of $80,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402…arrow_forwardOpulence Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Bellwether, can hold up to 3,200 passengers and it can cost $640 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 3,200 passengers. The variable expenses per passenger are estimated to be $75 per cruise day. The revenue per passenger is expected to be $375 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $74,880,000 per year. The ship has a service life of 10 years, with a residual value of $100,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376…arrow_forwardBlue Ocean Corporation placed into service some of the largest cruise ships in the world. One of these ships can hold up to 2,200 passengers and cost $440 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,200 passengers. The variable expenses per passenger are estimated to be $80 per cruise day. The revenue per passenger is expected to be $400 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $54,400,000 per year. The ship has a service life of 10 years, with a residual value of $70,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233…arrow_forward
- Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 2,900 passengers and cost $580 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,900 passengers. The variable expenses per passenger are estimated to be $70 per cruise day. The revenue per passenger is expected to be $350 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $63,336,000 per year. The ship has a service life of 10 years, with a residual value of $90,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592…arrow_forwardBlue Ocean Corporation placed into service some of the largest cruise ships in the world. One of these ships can hold up to 2,200 passengers and cost $440 million to build. Assume the following additional information: There will be 300 cruise days per year operated at a full capacity of 2,200 passengers. The variable expenses per passenger are estimated to be $80 per cruise day. The revenue per passenger is expected to be $400 per cruise day. The fixed expenses for running the ship, other than depreciation, are estimated to be $54,400,000 per year. The ship has a service life of 10 years, with a residual value of $70,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233…arrow_forwardCaduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.arrow_forward
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- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
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