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​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 would​ change?

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jeff jeffy answered 2 years ago
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