OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $505 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $71.7 million and its cost of capital is 12.3%.

a. Prepare an NPV profile of the purchase.

1. The NPV for a discount rate of 2.0% is $____ million

2. The NPV for a discount rate of 11.5% is $____ million

3. The NPV for a discount rate of 17.0% is $____ million

d. How far off could OpenSeas' cost of capital estimate be before your purchase decision would change?

The cost of capital estimate can be off by ___%