National Cruise Line, Inc. is considering the acquisition of a new ship that will cost $200,000,000. In this regard, the president of the company asked the CFO to nalyze cash flows associated with operating the ship under two alternative itineraries: Itinerary 1, Caribbean Winter/Alaska Summer and Itinerary 2, Caribbean Winter/Eastern Canada Summer. The CFO estimated the following cash flows, which are lexpected to apply to each of the next 15 years: Caribbean/ Eastern Caribbean/Alaska Canada Net revenue 120,000,000 $ 105,000,000 Less: (24,000,000) (20,000,000) (21,000,000) 115,000,000 155,000,000 Direct program expenses Indirect program expenses Non-operating expenses Add back depreciation Cash flow per year (25,000,000) (20,000,000) (21,000,000) 115,000,000 169,000,000 $ The estimated cost of the new ship and during of expected cash flows is: Estimated cost of new ship Estimated period of cash flows in years $ 200,000,000 15 Required a. For each of the itineraries, calculate the present values of the cash flows using required rates of ireturn of both 12 and 16% using both present value factors and separately using Excel PV function. Assume a 15-year time horizon. Should the company purchase the ship with either or both required Caribbean/Alaska 12% %3D 16% Required a. For each of the itineraries, calculate the present values of the cash flows using required rates of return of both 12 and 16% using both present value factors and separately using Excel PV function. Assume a 15-year time horizon. Should the company purchase the ship with either or both required Caribbean/Alaska 12% 16% Caribbean/ Eastern Canada 12% 16% Caribbean/Alaska Caribbean/ Eastern Canada Rate 12% 16% 12% 16% Number of periods Payments Future value PV Caribbean/Alaska Caribbean/ Eastern Canada Rate 12% 16% 12% 16% Number of periods Payments Future value PV b. The president is uncertain whether a 12 percent or a 16 percent required return is appropriate. Explain why, c. Focusing on a 12 percent required rate of return, what would be the opportunity cost to the company of using the ship in the Caribbean/Eastern Canada itinerary rather than a Caribbean/Alaska itinerary?