Ocean Carriers uses a 9% discount rate.
1. Do you expect daily spot hire rates to increase or decrease next year?
2. What factors drive average daily hire rates?
3. How would you characterize the long-term prospects of the capesize dry bulk industry?
4. Should Ms. Linn purchase the $39 million capesize? Answer this question under two alternative scenarios. First, assume that Ocean Carriers is a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong, where owners of Hong Kong ships are not required to pay any taxes on profits made overseas and are also exempted from paying any taxes on profits made on cargo uplifted from Hong Long.