The Net Present Value (NPV) is a financial metric that indicates the profitability of an investment by calculating the difference between the present value of cash inflows and outflows. In the given scenario, we're comparing two alternatives for purchasing a dry cargo ship over a 10-year analysis period. The alternative with a higher NPV is considered more economical. i=%1
### Alternative I:
Total Purchase Price**: $1300
Down Payment**: $300
Annual Payment (for 10 years)**: $100
Annual Operating Expenses (for 10 years)**: $100
Repair Requirement (Year 1)**: $400
Intermediate Repair Requirement (Year 5)**: $200
Annual Freight Income (for 10 years)**: $500
Scrap Value (Year 10)**: $500
### Alternative II:
Total Purchase Price**: $2200
Down Payment**: $600
Annual Payment (for 10 years)**: $160
Annual Operating Expenses (for 10 years)**: $140
Intermediate Repair Requirement (Year 5)**: $400
Annual Freight Income (for 10 years)**: $600
Scrap Value (Year 10)**: $800