SOLUTION(1)
Cost incurred for fitting the heating coil = Rs 10* 10^6
Cost incurred (or Profit forgone) for 10 days additional work( at the ship hire rate of Rs 150 per t dwt per
month)
= Rs 150 * 260000 * 10/30
= Rs 13 * 10 ^6
Total Cost incurred in year 0 for fitting of coils = Rs 10* 10^6 + Rs 13*10^6
= Rs 23 * 10^6
Annual income from time chartering of oncoiled ship
= Rs 150* 260000*((365-20)/30)
= Rs 448.5 * 10^6
(A)
Bringing all incomes and cost to the base year 0
SPW 12% - 5 years = (1+i)^n -1 for i= 12%, n=years
i (1+i ) ^n
(1+0.12)5 1
= 3.605
0.12(1 + 0.12) 5
Present worth of this investment for a 12% return
= -23 * 10^6 + 3.605 * 5.805 * 10^6
= Rs -2.073 * 10^6
= (- ) ve value
Investment not to be recommended for a 12% return
(B)
Let i be the rate of interest
CR i 5 years = 1/SPW = i(1+i)5
(1+i)5 -1
CR = A/P
where A = Rs 5.805 * 10^6
P = Rs 23 * 10^6
=
Or, i(1+i) 5
5.805 * 10^6 = 0.2524
(1+i)5 -1
23 * 10^6
Solving for I by trial and error
CR 10% - 5 Years = 0.2638
CR - 9 % - 5years = 0.2571
CR - 8% - 5years = 0.2506
Hence i = 8.27 %
(C)
Let Rs x be the minimum hire rate per t dwt per month
for the investment to be just worthwhile
Annual income from chartering the coiled ship is now
X * ( 260000-100) * (365-20)/30
= Rs 2.988 * 10^ 6 * X
Increase in revenue = Rs 2.98885 * 10^6 *X - Rs 448.5* 10^6
For venture to be just worthwhile the sum of the present worth of income and expenditure will be equal to 0.
Or,
-23 * 10^6 + (2.98885 * 10^6 * X 448.5 * 10^6) =0
Or, 2.98885 X = 23 + 448.5 = 471.5
Or, X= Rs 157.75 per tonne dwt per month.
(D)
Bringing all incomes and cost to the base year 0
SPW - 12% - 10years = (1+0.12)10 -1 = 5.65
0.12(1+0.12)10
Present Worth of this investment for 12%
-23 * 10^6 + 5.65 * 5.805* 10^6 = Rs 9.798 * 10^6
= (+) ve value
Investment to be recommended.
SOLUTION (2)
Cost incurred for fitting the slewing ramp at year 0 = $ 200 * 10^3
Annual Maintainence cost of slewing ramp = $ 2*10^3
(a) Let $ X be the increase in the daily timecharter rate for the vessel fitted with stern ramp.
Therefore, increased annual income for timechartering = X * 350
For investment to be worthwhile annual income annual expenditure(including the cost of fitting the
slewing ramp) must be zero for 15% eturn on investment over a 20 year period.
CR -15% - 20 years = i(1+i)N
= 0.15*(1.15)20
= 0.15976
N
(1+i) -1
1.15 20 -1
Therefore,
+200 * 10^3 * 0.15976 + 2* 10^3 = 350 *X
350 * X = 33952
X = $ 97
Therefore for this Ro- Ro vessel fitted with a stern slewing ramp the daily hire rate must be $7097 for
the investment to be worthwhile.
Let n be the number of times per year the ship could not berth for want of proper berth
Total number of hours lost per year = 6*n
Total number of days lost per Year = 6n/24 = n/4
Earning lost due to non-availability of berth = 7000 * n/4
200*10^3 * 0.15976 + 2 * 10^3 = 7000 *n/4
33952 = 1750 n
n = 19.4 = 20(approx.)
If the ship has to wait for 20 ports of call per year for want of appropriate berth , then it is profitable to go for
the option of having a slewing stern ramp.
SOLUTION (4)
Saving on fuel/ day = 0.02 * 60 = 1.2 t
Saving on fuel /hour = 1.2 / 24 = 0.05 t / hr
Initial investment = Rs 1200 * 10^3
Interest rate of money = 8%
(A) Additional running expenses per year for the fuel treatment plant = 20 * 5000 = Rs 100 * 10^3
Saving on fuel/Year = 0.05 * 5000 =250 t
Cost saving on fuel / Year = Rs 1000 * 250 = Rs 250 * 10^3
For the investment to be worthwhile the present worth of all costs and income should be (+) ve
PW = -1200 * 10^3 + (250 * 10^3 100 * 10^3) * 9.818
= -1200 * 10^3 + 1472.7 * 10^3 = 272.7 *10^3
= (+) ve
Hence , Investment is worthwhile.
(B)
When fuel cost is Rs 800/tonne
Cost saving on fuel per year = 800 * 250 = 200 * 10^3
PW = -1200 * 10^3 + ( 200 * 10^3 100 * 10^3)* 9.818
= -218.2 * 10^3 = (-) ve value
Investment is not worthwhile.
(C)
Additional running expense per year = 6500* 20 = Rs 130* 10^3
Saving in cost due to fuel saving /year = 0.05 *6500 * 1000
= Rs 325 * 10^3
SPW - 8% - 10 years = (1.08)10 -1 = 6.71
0.08 (1.08)10
PW = -1200 *10^3 + (325-130)*10^3 * 6.71 = Rs 108.45 * 10^3 = (+)ve value
Hence investment is worthwhile.
SOLUTION (5)
Round trip distance (RTP) = 12000*2 = 24000 Nm
Sea days per round trip(SD) = 24000/(24*15) = 66.667 days
Port days per round trip(PD) = 5.5 * 2 = 11 days
(sea days+ port days) per round trip = 66.667 + 11 = 77.667 days
Number of round trips /Year = ( 365-30) / 77.667 = 4.313
Fuel consumed per round round trip = 66.667*25 + 11* 15
= 1831.675 t
Fuel consumed per year = 1831.675* 4.313t = 7900 t
Cost of fuel per year = 1831.675 * Rs 1500 = Rs 11.85 * 10^6
Total operating cost per year = Fuel cost per year + Cargo handling cost per year+ other operating expense
per year
= 11.85 * 10^6 + 7.5*10^6 + 12.5 *10^6
= Rs 31.85 * 10^6 ( SAY. X)
Initial acquisition cost = Rs 250 * 10^6
Scrap value in 16 years = Rs 250 * 10^6 * 0.1
= Rs 25 * 10^6
let freight rate be Rs Y/ tonne
Cargo carried per round trip = 70000* 0.8 = 56000 t
Cargo carried per year
= 56000 * 4.313 = 241528 t
Annual income per year = Rs 241528*Y = Rs 0.241528 Y * 10^6
+ 1.07 X + (1.07)2 X + + (1.07)14 X
1.1
(1.1)2
(1.1)3
(1.1)15
2
= X [ 1 + 1.07 + (1.07) + .+ (1.07)14 ]
1.1
(1.1)2
(1.1)14
= X * ( 1 (1.07 / 1.1 )15 )
1.1 ( 1 1.07/1.1)
= X * 12.4487
= 11.317 X
1.1
= 11.317 * 31.85*10^6
= Rs 360.446 * 10^6
PW of scrap value = 25 / (1.1)15
= 5.9848 * 10^6
SPW 10% - 15years = (1+i)N -1 = 7.60608
i(1+i)N
PW of income and PW of expenditure = 0
Or,
-250 * 10^6 - 360.446*10^6 + 5.9848 * 10^6 + 7.60608 * 0.24158 Y =0
1.83708 Y = 604.46
Y = Rs 320.90/ t
PW of operating cost = X
SOLUTION (6)
Sea days ( SD ) = 15000 = 625 days
24* V
V
Port Days (PD) = 5days
Voyage time per trip = SD + PD = 625
+ 5 = 625 + 5V
V
V
Number of round trips per year = (365 -35 )
= 330 V
= 66V
( 625 + 5V)/V
625+ 5V
125+V
Let C be the total annual cost per year
Fuel bill is proportional to V3
Fuel cost per year = (0.2 C / 153) *V3
Machinery cost is 25% of aquisition cost and is proportional to V2
Capital repayment per year = 0.1*C = 0.075 *C + (0.025 C / 15 2 ) * V2
Other cost is proportional to square root of V
Other cost / year is daily running expenditure + Cargo handling cost = ( 50% + 20 % ) of annual
cost
Other cost per year = 0.7C * V
15
Annual expenditure per year = Fuel cost + capital repayment + other cost
=
0.2*C*V3 + 0.075C + 0.025C * V2 + 0.7 C V
153
152
15
Annual income per year = 330V * Fv
where Fv = freight/voyage
625+ 5V
At V=15 knots , NPV = 0
( Income Expenditure) at 15 knots =0
330*V * Fv - C[ 0.2*153 + 0.025 * 152 + 0.715 + 0.075 ] =0
625 + 5*15
3375
225
3.873
or, C[ 0.2+ 0.025 + 0.7 + 0.075] = 330 * 15 * Fv
625+75
C = 7.0714 Fv
Or,
Fv = 0.1414C
For the new ship , Let V be the speed
Income Expenditure = Average annual income (AAI)
AAI = 330V * Fv - C[ 0.2 V 3 + 0.025 V2 + 0.7V + 0.075 ]
625+5V
3375
225
3.873
AAI = 330V * 0.1414C - C[ 0.2 V 3 +
0.025 V2 +
0.7V + 0.075 ]
625+5V
3375
225
3.873
AAI = C [ 46.67 V - 0.2 V3 - 0.025V2 - 0.7 V - 0.075]
625+ 5V
3375
225
3.875
For optimal speed d(AAI) = 0
d(V)
this gives,
29168.75
- 0.6V2 - 0.05 V - 0.7
= 0
2
(625+5V)
3375
225
7.75V
At V = 16 knots L.H.S = - 0.0145
V= 14 knots L.H.S = -0.0017
V= 13 knots R.H.S = 0.0033
So by iteration we get Vopt = 13.6 knots
