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Ocean Carriers

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Ocean Carriers Inc. was approached in January of 2001 with a contract proposal for the leasing of one of their ships for a term of 3 years beginning in 2003. Ocean Carriers currently has no ship to accommodate the customer. To commission the construction of a new vessel would take 2 years from start to completion. The average rate in the spot market is $22,000 per day. Ocean Carriers deployed a younger fleet than average carriers and generally earned a 15% premium over the average daily rate placing them in position to capitalize in strong economies. However, the industry is volatile and suseptable to extremes both low and high. Many ship owners sought to sign contracts with time charters in order to shield themselves from the swings …show more content…

A. Revenues Calculations of expected annual revenue for Ocean Carriers: = Expected daily hire rate * (365 days- scheduled days for maintenance) Age of Ship | Calendar year | Expected Daily Hire Rate (from Exhibit 6) | Minus scheduled days for maintenance (from p.1) | Total Annual Sales | 1 | 2003 | 20,000 | 8 | $7,140,000.00 | 2 | 2004 | 20,200 | 8 | $7,211,400.00 | 3 | 2005 | 20,400 | 8 | $7,282,800.00 | 4 | 2006 | 18,714 | 8 | $6,680,898.00 | 5 | 2007 | 17,283 | 8 | $6,170,031.00 | 6 | 2008 | 17,481 | 12 | $6,170,793.00 | 7 | 2009 | 17,682 | 12 | $6,241,746.00 | 8 | 2010 | 17,886 | 12 | $6,313,758.00 | 9 | 2011 | 18,092 | 12 | $6,386,476.00 | 10 | 2012 | 17,428 | 12 | $6,152,084.00 | 11 | 2013 | 17,628 | 16 | $6,152,172.00 | 12 | 2014 | 17,831 | 16 | $6,223,019.00 | 13 | 2015 | 18,036 | 16 | $6,294,564.00 | 14 | 2016 | 18,243 | 16 | $6,366,807.00 | 15 | 2017 | 14,762 | 16 | $5,151,938.00 | 16 | 2018 | 14,932 | 16 | $5,211,268.00 | 17 | 2019 | 15,104 | 16 | $5,271,296.00 | 18 | 2020 | 15,278 | 16 | $5,332,022.00 | 19 | 2021 | 15,454 | 16 | $5,393,446.00 | 20 | 2022 | 14,654 | 16 | $5,114,246.00 | 21 | 2023 | 14,823 | 16 | $5,173,227.00 | 22 | 2024 | 14,993 | 16 | $5,232,557.00 | 23 | 2025 | 15,166 | 16 | $5,292,934.00 | 24 | 2026 | 15,341 | 16 | $5,354,009.00 | 25 | 2027 | 13,448 | 16 | $4,693,352.00 | B. Operating Expenses: =Expected rate of inflation (4,000) x (1+0.04)N Year (N) | Expected rate of

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