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OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $500 million, and would operate for 20 years. OpenSeas expects
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $500 million, and would operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70 million (at the end of each year) and its cost of capital is 12%. Prepare an NPV profile of the purchase with Excel, and estimate the IRR (to the nearest 1%) from the graph. a. What is the IRR? b. How far off could OpenSeas cost of capital be (to the nearest 1%) before your purchase decision would change? **SHOW INPUTS ON EXCEL**AND GRAPH
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