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Seacraft Carriers is considering two alternative cargo ships Ship A has an expected life of 7 years, will cost $60 million and will produce net cash flows of $17 million per year Ship B has a life

Seacraft Carriers is considering two alternative cargo ships. Ship A has an expected life of 7 years, will cost $60 million, and will produce net cash flows of $17 million per year. Ship B has a life of 14 years, will cost $75 million, and will produce net cash flows of $15 million per year. Seacraft plans to serve the route for 14 years. Inflation in operating costs, ship costs, and cargo rates is expected to be zero, and the company s cost of capital is 12%. What is the equivalent annual annuity for each ship? Which ship should be accepted?

Mar 30 2020 View more View Less

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