2 The operator can fund 75 percent of his capital costs with government insured mortgages, thus establishing a much higher debt to equity ratio than the average in his company, with no interest premium. Alternate investments may not generate this much debt leverage, and thus there is close coupling of the investment process and the capital source pool.

3 If the operator does not invest the money in a given fleet of ships, he may have to wait several years before he has another opportunity to invest his reserve funds.

Because of these considerations, an economic criteria was desired which would not only reflect different revenue and cost characteristics for the alternates considered, but would also reflect debt leverage effects. On this basis, the criteria of net cash flow was selected. This is defined as revenues less all cash costs and cash outflows required for the associated debt.

Appendix 3 shows the calculation of these criteria for the case of a 20-knot container ship system using conventional and nuclear power long-term costs. Three cases were considered in comparing nuclear and conventional power on this route, as shown in Table 4.

An allowance was made for the attraction of additional cargo volume with a higher average freight rate with the 27 and 30-knot fleets on the basis of cargo delivery time and other information.

must not be applied without careful consideration.

For general information, the capital-recovery factors and total costs per ton are shown in Figs.

and 8. Examination of these figures indicates that, on the long term, the 30-knot nuclear ships may be alternate opportunities for the subsidized American operator. Fig. 9 shows the operator's net cash flow with short-term nuclear costs.

The government's subsidy cost per dollar revenue earned, a criteria which reflects the government's concern with subsidy costs and balance of payments, and which also is applicable to all segments of the fleet, is shown in Fig. 10. Here it is seen that on subsidy costs alone, while the 30-knot ships are superior to the 20-knot oil-fired ships, the 30-knot nuclear ship is inferior to the 30-knot oil-fired ships. This is due to the large proportion of the total nuclear power cost which falls into the capital costs, which are subsidized, while a much larger proportion of fossil-fuel plant costs fall into the nonsubsidized fuel-oil area. However, if this curve were modified to reflect subsidy recapture under the subsidy laws, the higher profits from the nuclear ships, as reflected by their higher net cash flows, would result in a much more favorable net subsidy position for nuclear power.

It appears that, considering the improved position of the American operator with a highspeed nuclear fleet, and the lower net subsidy costs resulting from the higher productivity and improved commercial characteristics of the highspeed nuclear fleet (especially when potential subsidy recapture was considered), there are excellent bases for the current consideration being given to the constructive of a high-speed nuclear fleet by the U. S. Government.