Opulence Corporation operates several large cruise ships. One of these ships, th

Question

Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 2,400 passengers and cost $480 million to build. Assume the following additional information:

a. Â Determine the annual net cash flow from operating the cruise ship.

b. Â Determine the net present value of this investment, assuming a 10% minimum rate of return. Use the present value tables provided above. If required, round to the nearest whole dollar.

When you answer, can you please show me how you get to Present value of annual net cash flows & Total present value?

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 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162

Explanation / Answer

a)

revenues = 2400 * 300 *400 =288000000

variableexpense = 2400 * 300*80 = 57600000

fixed expense = 59300000

annual net cash flow = 171100000

b)

present value of annual net cash flows= (171100000) * ((1-(1/(1+0.1))^10)/0.1) = 1051335432

present value of residul value = 80000000 * (1/(1+0.1)^10) = 30843463.15

totalpresent value = 1082178895

initial investment = 480000000

net present value = 602178895.2

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