Ocean Liner Essay Example | Topics and Well Written Essays - 2000 words - 1

Ocean Liner - Essay Example The Vice President of Finance for Ocean Carriers has received an attractive proposal from a prospective customer who wants to lease a ship for the period of three years from the company. The customer, his offer and contract terms are all feasible, but the problem is that the company does not have any ship available at that time to meet the customer’s unique needs. Therefore, the company needs to urgently purchase a new ship so as to fulfill the customer’s request on time, or on the contrary reject the customer’s proposal. The problem underlying the case is not merely concerning the acceptance or rejection of the lease proposal by the customer. As the company cannot meet the customer’s demand simply with any of the available ships, it either needs to purchase a new ship matching the customer’s needs or to reject the proposal altogether. This does not concern the company with a single moment of thought regarding a new investment. The problem basically lies in investigating and analyzing the attractiveness of the customer offer against the investment that the company needs to make in this project. The crux of the issue is whether or not the company should purchase the new ship, which is necessary if Ocean Carrier wants to accept the proposal of this customer; otherwise the company will have to forego the attractive return offered. Secondly, the customer is willing to contract the ship for a period of three years, while the life of the ship would be 25 years. However as per the company’s policy, it utilizes a ship for no more than 15 years of its operations. Therefore, the investment in this new ship exclusively for this customer’s request needs to be analyzed in the perspective if the market environment is feasible for the purchase of new ship and that the ship can be used to generate returns for the company