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

OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $500 million and would operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70 million (at the end of each year) and its cost of capital is 12%.

Show your calculations and answer the following questions

  1. 7.1) Calculate the NPV of the project if the cost of capital is 12%

  2. 7.2) Is the purchase an attractive investment?

  3. 7.3) Would your answer change if the cost of capital was 13%?

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jeff jeffy answered 1 year ago
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