Case Study Morgan Stanley

In January 2001, Mary Linn, Vice President of Finance of nautical Carriers, a ravishping company with offices in New York and Hong Kong, was evaluating a proposed lease of a ship for a triple twelvemonth period, beginning in early 2003. The customer was eager to take root the contract to meet his own commitments and offered a very spellbinding call. No ship in ocean Carriers current fleet met the customers requirements. Linn, therefore, had to decide whether oceanic Carriers should immediately purchase a new-fashioned capesize carrier (a salient cargo ship) that would be completed two years therefrom and could be leased to the customers.
However, the proposed contract with the customer is only for three years. Therefore, after the three years, the ship will have to be leased for other customers. It is Linns responsibility to decide if future(a) market conditions warranted a delibe enjoinable investment in the new ship. The objective of this case direct is to estimate the net empower value of the investment in the new capesize carrier.
The customer of Ocean Carriers who charters a vessel pay a daily let outrank for the entire length of the contract. Thus, the daily hire rate as sanitary as the number of days the ship is chartered determine the revenue from the ship.



To examine the viability of the investment, it is important to consider the possible daily hire rate as well as the demand for such vessels.
Since the daily hire rate is determined by the affix and the demand for such services, we source take a look at the supply of Capesize vessels.Future supply of the capesize vessels is the sum of current vessels, minus the vessels that will be scraped, cocksure new ships delivered. Exhibit 2 shows the existing capesize carriers in terms of the sum of the loading capacity. (See Exhibit 2 of your case study note)
There are 2 million tones of capesize with the age oer 24 years. We can expect that these old vessels would be in short scrapped, which in turn would reduce the supply of the capesize...If you want to prevail a full essay, order it on our website: Orderessay



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