Net Present Value Method for a Service Company DUM Carnival (CCL) has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Breeze, can hold up to 3.600 passengers, which can cost $750 million to build. Assume the following additional information: . There will be 340 cruise days per year operated at a full capacity of 3,600 passengers The variable expenses per passenger are estimated to be $100 per cruise day. . The revenue per passenger is expected to be $280 per cruise day. The foxed expenses for running the ship, other than depreciation, are estimated to be $90,000,000 per year. The ship has a service life of 10 years, with a residual value of $60,000,000 at the end of 10 years. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.993 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.513 0.452 0.376 0.279 0.627 0.467 0.404 0.327 0.233 9 0 .592 0.424 0.361 0.294 0.194 100 .558 0.386 0.322 0.247 0.162 in 0.663 Present Value of an Annuity of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.693 0.870 0.833 1.833 1.736 1.699 2.673 2.402 3.037 1.526 Previous Next Chede. Hy work eBook C: ulator Pe Value of an An wty of $ 20% 3.605 111 CONU 0.943 0.909 0.893 0.870 0.833 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.353 2.991 4.917 4.355 3.785 3.326 5.582 4.868 4.160 3.605 6.210 5.335 14.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 7.360 6.145 4.192 a. Determine the annual net cash flow from operating the cruise ship. Revenues 342,720,000 Variable expenses 122,400,000 Fixed expenses (other than depreciation) 90,000,000 Annual net cash flow 130,320,000 b. Determine the net present value of this investment, assuming a 12% min Present value of annual net cash flows $ 890,440.000 x Present value of residual value Total present value 935,520,000 X Amount to be invested 750,000,000 Net present value $ 185,520,000 X Check My Work