Case study: Executives and shareholders of a global shipping company named CHIMAD Transportation and Shipping Solutions are trying to decide if it would be financially beneficial for the company to build a brand new container ship to add to their fleet. We will need to consider the estimated construction costs, operating expenses, and revenues of a state-of-the-art gearless container ship capable of carrying up to 6,500 TEU. CHIMAD is willing to pay an average price of $100 million for the ship. We will also assume the ship will have a service life of 30 years.
Construction Costs: Let’s assume that the shipping company is paying cash for the construction of the new container ship with $50 million being paid at the start of the project and the remaining $50 million paid at the beginning of the next year (a two-year construction period).
Operating Costs: The yearly operating costs for a container ship can add up quickly between crew salaries, general maintenance, and repairs, etc. The estimated operating costs for the first year the vessel is in operation are $7 million and increases by 3% in operation cost each year to take into account inflation.
Projected Revenue: Presume that our container shipping company scored a 10-year contract at $500,000 per day and the company could operate the vessel with a revenue efficiency of 93%. What would be the projected annual revenue for the first 10 years?

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