Business, 14.02.2020 18:26 linnaefoos2183

OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $500 million but would operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.0 million and its cost of capital is 12.0%
a. Prepare an NPV profile of the purchase using discount rates of 2.0%, 11.5% and17.0%.
b. Identify the IRR on a graph.
c. Should OpenSeas go ahead with the purchase?
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.)

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OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $500 million but...