Halcyon Lines is considering the purchase of a new bulk carrierfor $8.7 million. The forecasted revenues are $5.9 million a yearand operating costs are $4.9 million. A major refit costing $2.9million will be required after both the fifth and tenth years.After 15 years, the ship is expected to be sold for scrap at $2.4million. a.
A. What is the NPV if the opportunity cost of capital is 9%?(Negative amount should be indicated by a minus sign. Do not roundintermediate calculations. Round your answer to the nearest wholedollar amount.) Net present value $ b. Halcyon could finance theship by borrowing the entire investment at an interest rate of4.5%. Will this borrowing opportunity affect your calculation ofNPV?
