OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $500 million and will operate for 20

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Openseas Inc Is Evaluating The Purchase Of A New Cruise Ship The Ship Will Cost 500 Million And Will Operate For 20 1 (35.3 KiB) Viewed 73 times

OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $500 million and will operate for 20 years. Open Seas expects annual cash flows from operating the ship to be $70.7 million and its cost of capital is 12.1%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should Open Seas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change? a. Prepare an NPV profile of the purchase. To plot the NPV profile, we compute the NPV of the project for various discount rates and plot the curve. The NPV for a discount rate of 2.0% is $ million. (Round to one decimal place.)