OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $500 million, but would operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.0 million(at the end of eachyear) and its cost of capital is 12.0%

a. Prepare a NPV profile of the purchase using discount rates of 2.0%, 11.5% and 17.0%.

b. Identify the IRR (to the nearest1%) on a graph.

c. Is the purchase attractive based on theseestimates?

d. How far off couldOpenSeas? cost of capital be(to the nearest1%) before your purchase decision wouldchange?

Note: Subtract the discount rate from the actual IRR. Use Excel to compute the actual IRR.