OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $ 504 ?million, and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $ 69.3 million and its cost of capital is 11.4 %.

The NPV for a discount rate of 2.0 % is ___?

The NPV for a discount rate of 11.5 % is ___?

The NPV for a discount rate of 17.0 % is ___?

b. Identify the IRR on the graph.

The approximate IRR from the graph is ??%. (see attached graph)

c. Should OpenSeas go ahead with the? purchase????(Select the best choice? below.)

A. ?No, because at a discount rate of11.4%, the NPV is positive.

B.?Yes, because at a discount rate of 11.4%?, the NPV is positive.

C. Yes, because at a discount rate of 11.4 %, the NPV is negative.

D. No, because at a discount rate of 11.4 %, the NPV is negative.

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 ??%.

NPV Profile of Cruise Ship Investment 1,000 800 600 400 200 10 12 -200 Discount rate (%)