INA$ANDRIANI$$

GBA$Individual$Assignment$
$
Compass$Maritime$Services,$LLC$:$Valuing$Ships$
1. The&closest&comparable&based&on&ship&type,&age,&size&and&condition&is&Sumihou&:&

Sale%Date Vessel%Name
Nov$07
Sumihou

Trailing%10Year%
Dead0
Average%
Age%at% Weight% Monthly%Baltic%
Sale%Price Year
Sale
Tons
Dry
($US%millions) Built (Years)
(000) Capesize%Index
$106.0 1996
11 171.1
9,663 &

2. Expected&relationship&between&ship&price&and&each&factor&&

Intercept
Age5(Years)
DWT5(000)
Capesize5Index

Coefficients Standard.Error
t.Stat
P1value
44.22150997
16.3836613 2.699123 0.009826
;4.543796819 0.261475925 ;17.3775 2.53E;21
0.242171385 0.091618122 2.643269 0.011333
0.007207056 0.000598091 12.0501 1.57E;15 &

a. >Age&has&the&highest&correlation&with&Sales&Price.&However,&the&correlation&is&negative&due&to&
potentially&decreasing&future&cash&flow&in&addition&to&increased&risk&(wear&and&tear,&maintenance&
cost)&with&increasing&age.&
>DWT&has&the&next&highest&value&of&correlation&and&it&is&positively&correlated,&as&the&future&cash&
flow&increases&with&increasing&capacity&(more&goods&can&be&shipped).&
>Cape&size&Index&is&positively&correlated&with&the&Sale&Price&but&has&the&smallest&correlation&of&all.&
Sale&prices&increase&with&the&Index&increment&(higher&charter&prices).&Increasing&Cape&size&Index&
means&better&state&of&economy,&higher&demand,&higher&willingness&to&buy&(demand&curve&
shifting&rightward).&&
&
b. Other&factors&might&affected&the&price&:&
Type&of&main&engine&
Loading&equipment&(e.g.&crane)&
Location&(where&was&the&ship&at&the&time&of&sale)&
Shipyard&(original&builder)&
&
Regression)Statistics
Multiple(R
0.959391052
R(Square
0.920431191
Adjusted(R(Square
0.915006045
Standard(Error
9.881762287
48 &
c. Observations
The&linear&combination&of&all&three&variables&provides&the&best&prediction&for&Sales&Price&
because:&&

The&regression&analysis&with&all&the&three&variables&combined&together,&gives&92%&R>square&and&
91.5%&Adjusted&R>square&values&which&show&a&close&fit&of&the&predicted&values&with&the&given&
values&in&the&regression&line.&
The&variables&individually&do&not&correctly&predict&the&sale&price&since&the&R>square&and&Adjusted&
R>square&values&obtained&from&single&regression&analysis&are&very&low&as&the&results&show&in&the&
table&below&:&&
Sales&price&VS&Age
Regression)Statistics
Multiple(R
0.754289732
R(Square
0.568953
Adjusted(R(Square0.558928651
Sales&Price&VS&DWT
Regression)Statistics
Multiple(R
0.529232716
R(Square
0.280087267
Adjusted(R(Square0.263345111
Sales&Price&VS&Cape&Size&index
Regression)Statistics
Multiple(R
0.284012549
R(Square
0.080663128
Adjusted(R(Square0.059283201 &
&
d. Using&all&the&three&factors,&and&plugging&in&the&value&of&each&variable&to&the&equation&,&
Sales&Price&=&,4.54&(11)&+&0.24&(172)&+&0.007&(12,479)&+&44.22&
the&predicted&price&for&the&Bet&Performer&is&125$$US$Millions.&
&
With&95%&confidence&interval,&the&Lower&Bound&and&Upper&Bound&for&average&price&are&:&
LB&&
:&118.77&$US&Millions&
UB&&
:&132.66&$US&Millions&
Coefficients Standard.Error
t.Stat
P1value
Lower.95%
Upper.95%
Intercept 125.7181693 3.445285844 36.48990968 5.47822E434 118.7700882 132.6662504
43 44.563162472
0.26216553 417.40565388 4.37264E421 45.091869651 44.034455293
41.8 0.247651996 0.091773215 2.698521539 0.009912833
0.06257367 0.432730322
47832.25 0.007111288 0.000605607 11.74241285 5.29807E415 0.005889965 0.008332611 &
&
And&the&Lower&Bound&and&Upper&Bound&for&the&specific&prediction&are&:&
New$SE 10.46437668
ME
20.5101783
UB
146.23
LB
105.21
&
&
e. By%plugging%in%the%values%into%the%equation%
Sales&Price&=&,4.54&(Age)&+&0.24&(DWT)&+&0.007&(Capesize&Index)&+&44.22&,%we%get%the%results%as%
below%:&

a.#5#years#younger
Age
DWT
Index0(May02008)
Sale0price

6
172
12,479
148.55

c.#Charter#rates#30%#lower
Age
11
DWT
172
Index0(May02008)
8,736
Sale0Price
98.85
&

b.#Ship#were#20K#DWT#smaller
Age
11
DWT
152
Index0(May02008)
12,479
Sale0Price
120.99

&

&
3. If&I&were&Basil&Karatzas,&i&would&recommend&the&client&to&take&the&Upper&Bound&of&average&sales&
price&(132.66$$US$Million).&Assume&that&the&model&is&right,&the&average&sales&price&would&be&125&
Million&$US.&Thus,&with&this&offer&,&I&can&give&an&above&average&offer.&As&explained&in&the&passage,&
if&buyer&offer&bellow&market&price,&the&negotiation&often&shut&downs.&I&also&knew&that&the&client&
would&have&little&trouble&financing&the&purchase&if&the&bid&were&accepted.&
Note&that&the&interval&estimate&for&a&specific&prediction%is&wider&than&the&interval&estimate&for&
the&average.%This&difference&reflects&that&we&can&estimate&the&average&sales&price&with&more&
precision&than&we&can&predict&sales&price&for&one&specific&prediction.%
Example&of&how&the&market&price&increase&had&shown&in&the&Nightflight&case&where&the&owner&
can&get&more&than&50%&gain&in&just&13&months.&The&Bet&Performer&last&bought&2&years&ago&with&
70&Million&$US&sale&price.&So&if&it&is&now&sold&for&132.66&Million&$US,&the&owner&will&gain&90%&
margin&from&the&original&price.&Compared&to&the&Nightflight&case,&it&gives&the&same&yearly&gain.&
So,&it&is&a&fair&offer&for&the&owner.&
&