QUESTION 3 A shipowner is considering the construction of a 250,000 dwt tonne VLCC at a price of US$ 60m that will be time chartered for an 8 year period at a daily hire rate of USS 40,000 assuming a 350-day year. The operating expenses in year 1 are US$2.5 m increasing at US$100,000 per annum over the duration of the time charter. The owner is negotiating with two banks that have submitted competing offers to finance this acquisition. As is customary in ship finance both banks charge interest on the declining balance. Which of the two offers is preferable? Bank A-75% loan at an interest rate of 3% over 6 years Bank B-80% loan at an interest rate of 3.5% over 8 years You may assume a discount rate of 5%. QUESTION 3 A shipowner is considering the construction of a 250,000 dwt tonne VLCC at a price of US$ 60m that will be time chartered for an 8 year period at a daily hire rate of US$ 40,000 assuming a 350-day year. The operating expenses in year 1 are US$2.5 m increasing at US$100,000 per annum over the duration of the time charter. The owner is negotiating with two banks that have submitted competing offers to finance this acquisition. As is customary in ship finance, both banks charge interest on the declining balance. Which of the two offers is preferable? Bank A -75% loan at an interest rate of 3% over 6 years Bank B -80% loan at an interest rate of 3.5% over 8 years You may assume a discount rate of 5%. QUESTION 3 A shipowner is considering the construction of a 250,000 dwt tonne VLCC at a price of US$ 60m that will be time chartered for an 8 year period at a daily hire rate of USS 40,000 assuming a 350-day year. The operating expenses in year 1 are US$2.5 m increasing at US$100,000 per annum over the duration of the time charter. The owner is negotiating with two banks that have submitted competing offers to finance this acquisition. As is customary in ship finance both banks charge interest on the declining balance. Which of the two offers is preferable? Bank A-75% loan at an interest rate of 3% over 6 years Bank B-80% loan at an interest rate of 3.5% over 8 years You may assume a discount rate of 5%. QUESTION 3 A shipowner is considering the construction of a 250,000 dwt tonne VLCC at a price of US$ 60m that will be time chartered for an 8 year period at a daily hire rate of US$ 40,000 assuming a 350-day year. The operating expenses in year 1 are US$2.5 m increasing at US$100,000 per annum over the duration of the time charter. The owner is negotiating with two banks that have submitted competing offers to finance this acquisition. As is customary in ship finance, both banks charge interest on the declining balance. Which of the two offers is preferable? Bank A -75% loan at an interest rate of 3% over 6 years Bank B -80% loan at an interest rate of 3.5% over 8 years You may assume a discount rate of 5%