Question
In: Finance
Company A is assessing the purchase of a new ship. The ship will cost $497 million...
Company A is assessing the purchase of a new ship. The ship will cost $497 million and will operate for 20 years. The company estimates annual cash flows from operating the ship to be $71.1 million, and its cost of capital is 12.5%.
- Calculate the NPV and IRR of the purchase.
- Prepare an NPV profile of the purchase and highlight the IRR.
- Should the company proceed with the purchase?
- How far off could the firm’s cost of capital estimate be before your purchase decision would change?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Seashore Inc., is assessing the purchase of a new ship. The ship will cost $497 million...
Seashore Inc., is assessing the purchase of a new ship. The ship
will cost $497 million and will operate for 20 years. The company
estimates annual cash flows from operating the ship to be $71.1
million, and its cost of capital is 12.5%.
Calculate the NPV and IRR of the purchase.
Prepare an NPV profile of the purchase and highlight the
IRR.
Should the company proceed with the purchase?
How far off could the firm’s cost of capital estimate be...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $497...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship.
The ship will cost
$497
million, and will operate for
20
years. OpenSeas expects annual cash flows from operating the
ship to be
$68.1
million and its cost of capital is
11.7%.
a. Prepare an NPV profile of the purchase.
b. Identify the IRR on the graph.
c. Should OpenSeas proceed with the purchase?
d. How far off could OpenSeas' cost of capital estimate be
before your purchase decision...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $497...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship.
The ship will cost $497 million, and will operate for 20 years.
OpenSeas expects annual cash flows from operating the ship to be
$70.1 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 OpenSeas proceed with the purchase?
d. How far off could OpenSeas' cost of capital estimate be
before your purchase decision...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship.
The ship will cost $ 495 million and will operate for 20 years.
OpenSeas expects annual cash flows from operating the ship to be $
69.8 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 OpenSeas go ahead with the purchase? d. How far off could
OpenSeas's cost of capital estimate be...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship.
The ship will cost
$ 500$500
million, and will operate for
2020
years. OpenSeas expects annual cash flows from operating the
ship to be
$ 70.0$70.0
million and its cost of capital is
12.0 %12.0%.
a. Prepare an NPV profile of the purchase.
b. Identify the IRR on the graph.
c. Should OpenSeas proceed with the purchase?
d. How far off could OpenSeas' cost of capital estimate be...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship.
The ship will cost $ 495 million, and will operate for 20 years.
OpenSeas 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 OpenSeas proceed with the purchase? d. How far off could
OpenSeas' cost of capital estimate be before...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship.
The ship will cost $499 million, and will operate for 20 years.
OpenSeas expects annual cash flows from operating the ship to be
$69.9 million and its cost of capital is 12.2%.
a. Prepare an NPV profile of the purchase.
b. Identify the IRR on the graph.
c. Should OpenSeas proceed with the
purchase?
d. How far off could OpenSeas' cost of capital
estimate be before your purchase decision...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $502...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship.
The ship will cost $502 million, and will operate for20 years.
OpenSeas expects annual cash flows from operating the ship to be
$68.9 million and its cost of capital is 11.4%.
a. Prepare an NPV profile of the purchase.
b. Identify the IRR on the graph.
c. Should OpenSeas proceed with the purchase?
d. How far off could OpenSeas' cost of capital estimate be
before your purchase decision would...
OpenSeas, Inc., is evaluating the purchase of a new cruise ship. The ship will cost $500...
OpenSeas, Inc., is evaluating the purchase of a new cruise ship.
The ship will cost $500 million, and will operate for 20 years.
OpenSeas expects annual cash flows from operating the ship to be
$70 million and its cost of capital is 12%.
a. Prepare a NPV profile of the purchase. Do from rate 0% to 20%
(please show me the formula you use, I have been trying to figure
it out and cant)
b. Identify the IRR on the...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $495...
OpenSeas, Inc. is evaluating the purchase of a new cruise ship.
The ship will cost $495 million, and will operate for 20years.
OpenSeas expects annual cash flows from operating the ship to be
$71.4 million and its cost of capital is 12.3%.
a. Prepare an NPV profile of the purchase.
b. Identify the IRR on the graph.
c. Should OpenSeas proceed with the purchase?
d. How far off could OpenSeas' cost of capital estimate be
before your purchase decision would...
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