Energas plc is a shipping company, which specialises in transportation of crude oil using tankers. The...
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Energas plc is a shipping company, which specialises in transportation of crude oil using tankers. The company is constantly exanding and it currently considers to buy one additional second-hand small tanker in four years from now. However, there is a second option to accelerate its growth by signing a contract with a new customer, which will then requires the acquisition of the additional tanker in two years from now rather than in four years. The cost of the tanker is £15 million and it will remain constant. It will only be used for five years and will have zero residual value. The tax rate of the company is (25%. What incremental free cash flows should be included in order to evaluate the effect of signing the contract with the new customer, which will accelerate the growth and require purchasing the additional tanker in two years instead of four? Energas plc is a shipping company, which specialises in transportation of crude oil using tankers. The company is constantly exanding and it currently considers to buy one additional second-hand small tanker in four years from now. However, there is a second option to accelerate its growth by signing a contract with a new customer, which will then requires the acquisition of the additional tanker in two years from now rather than in four years. The cost of the tanker is £15 million and it will remain constant. It will only be used for five years and will have zero residual value. The tax rate of the company is (25%. What incremental free cash flows should be included in order to evaluate the effect of signing the contract with the new customer, which will accelerate the growth and require purchasing the additional tanker in two years instead of four?
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Answer rating: 100% (QA)
To evaluate the effect of signing the contract with the new customer and accelerating the purchase of the additional tanker we need to calculate the i... View the full answer
Related Book For
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman
Posted Date:
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