To be efficient a ship must be able to carry out its intended functions economically. Costs are always important. Unless those of a merchant ship are less than the revenue it can earn, the ship will be a liability. For warships, which do not 'earn' in the commercial sense the cost effectiveness of a design is harder to define let alone assess. In the end the warship designer can only inform the naval staff of the cheapest way to meet the requirement. It has then to be decided whether this amount of money can be allocated from the defence budget against the competing bids of other requirements. If not, then the requirement must be reduced till an acceptable balance is achieved between need and affordability. For any ship costs should be through life costs, not just build costs. Thus it might be better to use more mechanization to reduce crew size if the cost of mechanizing is less than the associated crew costs over the life of the ship. These are not easy balances to assess. Besides being paid the crew must be trained, they need space on board and so on. Mechanization will bring with it initial and maintenance costs, with the need for maintainers offsetting in part other crew reductions.

Assuming the ship can earn revenue this can be assessed for the years ahead using the anticipated freight rates. Build costs will arise early on and then operating costs, including costs of crew, bunkering, port charges, refitting and repair, will be spread over the life cycle. At the end of the day the owner hopes there will be a profit. Depreciation must be allowed for although it is not an item of cash flow.

All the cash flow elements must be brought to a common basis by treating them as though they occurred simultaneously. This is because cash has a time value in that it might be used more profitably in some other way. It is usual to apply discounted cash flow methods to establish a net present value for the comparison of different design options. A compound interest rate is used to determine the 'present' value of money to be spent in later years. The net present value must be positive if it is to be acceptable. The higher it is for any option the better that option is from an economic point of view. The process can be inverted to give the freight rate needed to give a net present value of zero.

How To Have A Perfect Boating Experience

How To Have A Perfect Boating Experience

Lets start by identifying what exactly certain boats are. Sometimes the terminology can get lost on beginners, so well look at some of the most common boats and what theyre called. These boats are exactly what the name implies. They are meant to be used for fishing. Most fishing boats are powered by outboard motors, and many also have a trolling motor mounted on the bow. Bass boats can be made of aluminium or fibreglass.

Get My Free Ebook

Post a comment