OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $ 505

$505 million, but would operate for 20

20 years. OpenSeas expects annual cash flows from operating the ship to be $ 69.5

$69.5 million(at the end of eachyear) and its cost of capital is 11.9 %

11.9%

a. Prepare an NPV profile of the purchase using discount rates of

2.0%,

11.5% and 17.0 %

b. Identify the IRR on a graph.

c. Is the purchase attractive based on theseestimates?

d. How far off couldOpenSeas' cost of capital estimate be before your purchase decision wouldchange? (NOTE: Subtract the discount rate from the actual IRR. Use Excel to compute the actualIRR.)