Compass Maritime Services, LLC: Valuing Ships
Posted: 7 Feb 2012
Date Written: December 6, 2010
Tom Roberts, a founding partner of Compass Maritime Services, a New Jersey-based shipping research and consulting firm, has been asked by a new potential customer in May 2008 for advice on purchasing a capesize bulk carrier. After identifying a suitable ship with his colleague Basil Karatzas, they must determine an appropriate offer price for the ship and justify their recommendations.
Learning Objective: This case is designed for introductory finance, quantitative methods, econometrics, or microeconomics courses. It is designed to accomplish four objectives: 1) Teach basic valuation analysis using comparable transactions; 2) Teach basic regression analysis (both simple and multiple regression); 3) Illustrate how regression analysis can be used to help make important investment decisions (bulk carriers cost on the order of $100-$150 million); and 4) Illustrate the importance of integrating managerial judgment with analytic tools in determining an appropriate acquisition/offer price and in making a set of recommendations to potential customer.
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