OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $ 498

$498 million, and will operate for 20

20 years. OpenSeas expects annual cash flows from operating the ship to be $ 70.8

$70.8 million and its cost of capital is 12.3 %

12.3%.

a. Prepare a NPV profile of the purchase.

b. Identify the IRR on the graph.

c. Should OpenSeas proceed with thepurchase?

d. How far off couldOpenSeas' cost of capital estimate be before your purchase decision wouldchange?

a. Prepare a NPV profile of the purchase.

To plot the NPV profile we compute the NPV of the project for various discount rates and plot the curve.

The NPV for a discount rate of 2.0 %

2.0% is $

nothing

million. (Round to one decimalplace.)