A ship costs $10 mil., financed through a 7 year loan. The vessel's
income and expense days are 355 and 365, respectively. Loan Tenor =
7 years. Required return (WACC) = 10%.
Annual CAPEX and OPEX expenses = 8,000$/day 365 days
Annual Income = TC rate * 355 days
Net Income = Annual Income - Annual Expenses
RFR is the TC rate, which will be sufficient to cover expenses and
provide a 10% return on investment
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That is, it is the minimum time charter rate, which the ship needs to
achieve over the 7 year period in order to achieve NPV>=0 – for the
loan to be repaid