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 $70.3 million and its cost of capital is 11.7%.

a. Prepare an 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% is $ million. (Round to one decimal place.) The NPV for a discount rate of 11.5% is $million. (Round to one decimal place.) million. (Round to one decimal place.) The NPV for a discount rate of 17.0% is $ The NPV profile is: NPV Profile of Cruise Ship Investment 1,000+ 900- 800- 2 700- 600- 500- NPV ($ millions) 400- 300- 200- 100- 0 1 2 4 6 8 10 12 IN 16 18 20 -100- -200- Discount rate (%) b. Identify the IRR on the graph. The approximate IRR from the graph is %. (Round your answer to one decimal place.) c. Should Open Seas go ahead with the purchase? (Select the best choice below.) O A. No, because at a discount rate of 11.7%, the NPV is negative. O B. Yes, because at a discount rate of 11.7%, the NPV is negative. OC. No, because at a discount rate of 11.7%, the NPV is positive. O D. Yes, because at a discount rate of 11.7%, the NPV is positive. d. How far off could OpenSeas' cost of capital estimate be before your purchase decision would change? (Note: Subtract the discount rate from the approximate IRR.) The cost of capital estimate can be off by %. (Round to one decimal place.)