• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Economy Shipping Company

Extracts from this document...

Introduction

Economy Shipping Company Advanced Financial Management Professor Clayton July 21, 2005 Tim Boyd Dave Chen Ian Hoffman Chirayu Patel It is recommended that Economy Shipping Company (ESC) replace the steamboat, Cynthia, with a new diesel powered boat. The analysis assumed no operating cost in 1950. Although ESC was presumably still in service during this analysis, the costs associated with the project evaluation were not accounted for until 1951. It was also implicit in the NPV calculations that any upgrade required subsequent to 1950 could be performed without any interruption to the daily operations and were performed at the beginning of the year. Therefore, the stoker upgrade and the engine replacements were considered on Jan 1st of the intended year and did not require any downtime for the installation. The evaluation considered four different scenarios: 1. Rehabilitation of Cynthia with the stoker conversion occurring in 1950 (App A) ...read more.

Middle

If the new regulation had fines associated for any vessel not in compliance with the new guidelines, the results for the steamboat scenarios would only get worse. In this case, the diesel-powered boats could accommodate the anticipated ruling and therefore continue to operate without fear of being unlawful. Another disadvantage against rehabilitating Cynthia was its age. At the time of the decision the steamboat had already been in operation for 23 years. Although, the realizable cost to renovate the steamboat was already known, the intangible aspect of this alternative was the status of the boat once refurbished. It should be noted that with any overhaul, there are still aspects to the boat that will remain "old" and will eventually fail. The maintenance and repairs listed in the case appear to indicate general maintenance and not a catastrophic event as is suggested. The cost of another large repair that is associated with age has not been calculated for but must be understood as a variable to the rehabilitation options. ...read more.

Conclusion

The immediate stoker conversion resulted in an equivalent annual cost of $114,040. Compared to the two purchasing options ($110,833, $111,402) the cost of the rehabilitation option was slightly higher. Although both of the purchasing options were optimal compared to the alternative of rehabilitating Cynthia, the effect that the union's proposition would have on the shipping industry would obviously increase the cost of doing business. If the controller's instincts are correct, the NPV calculation for the purchasing option would increase by $4,850 and the EAC would increase by $570. Although these dollars would eat into the profit, the alternative may be far more costly if fines are administered for those vessels not in compliance. While the analysis may suggest that the two main options (overhaul vs. purchase) are close in cost, it is obvious that with all the intangibles associated with this case that the purchase of the new diesel powered boats guarantees a successful future, whereas the steamboat option is dependent on unlikely events. 3 Economy Shipping Company 7/21/05 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Bellway Plc is a holding company with subsidiaries; its main subsidiary company is Bellway ...

    103.9 96.7 66.4 53.2 40.7 35.9 31.9 Wessex 480 474 475 372 380 179.6 181.9 133.5 110.6 119.7 86.2 86.2 63.4 41.9 45.5 Southern Sub-Total 3243 2791 2511 2500 2543 172.9 171.6 149.3 157.1 139.6 560.7 479.0 374.9 392.7 354.9 Group Total 6610 6278 6044 5725 5714 161.4 149.7 120.8 119.0 106.4 1066.5 939.8 730.3 681.3 607.8 7.

  2. Toyota Motor Company Limited

    It sold 18,000 vehicles in fiscal 2002. Toyota plans to continue bolstering its manufacturing base in North America with a view to achieving production capacity of 1.45 million vehicles during 2003. As part of these efforts, it is currently constructing a plant in Alabama to supply V8 engines for the

  1. Explanations of EVA, MVA and NPV and

    company and the economic capital' (Firer, 1995: 57, Reilly and Brown, 2003:591). The economic capital of the company is the amount that has been invested in the company which is simply the fixed assets plus the networking capital. MVA is the best external measure of a company's performance.

  2. The Famous Grouse - company profile and exports

    These restrictions should not disrupt the sales of Famous Grouse as the product may be sold in another country as a specialized drink. With the strengths and weaknesses identified in expanding abroad, it is safe for Famous Grouse to take the next step in the process that would be to establish where would be the best foreign market to enter.

  1. Environmental Analysis Of Landis Lund.

    are basically mail order via the web, they don't incur high labour costs as they don't have any high street shops to finance. This approach has been mentioned to senior management but they feel, at this moment in time, the administrative costs to Landis Lund to setup an new supplier

  2. Chinese economy sets for soft landing in 2005.

    Commenting on Zeng's ambitious plans, Jos� Mar�a Figueres, Chief Executive Officer of the World Economic Forum, said, "The idea of such a huge development programme has never been entertained before." China will continue to pursue market-based enterprise reforms, Ma Kai, Chairman of the National Development and Reform Commission, People's Republic of China, added.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work