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OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost 5504 million, but would operate for
Posted: Sat Feb 26, 2022 9:13 am
by answerhappygod
- Openseas Inc Is Evaluating The Purchase Of A New Cruise Ship The Ship Would Cost 5504 Million But Would Operate For 1 (21.91 KiB) Viewed 19 times
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost 5504 million, but would operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $69.1 million (at the end of each year) and its cost of capital is 11.5% a. Prepare an NPV profile of the purchase using discount rates of 2.0%, 11.5% and 17.0%. b. Identify the IRR on a graph. c. Is the purchase attractive based on these estimates? d. How far off could OpenSeas' cost of capital estimate be before your purchase decision would change? (NOTE: Subtract the discount rate from the actual IRR. Use Excel to compute the actual IRR.) a.Prepare an NPV profile of the purchase using discount rates of 2.0%, 11.5% and 17.0%. The NPV for a discount rates of 2.0% is million. (Round to the nearest integer.)