OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499 million, and will operate for 20 years. OpenSeas expects
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499 million, and will operate for 20
years. OpenSeas expects annual cash flows from operating the ship to be $69.2 million and its cost of capital is 11.6%.
a. Prepare an NPV profile of the purchase.
b. Identify the IRR on the graph.
the approximate IRR from the graph is _____ ( round your answer to one decimal place)
c. Should OpenSeas proceed with the purchase?
d. How far off could OpenSeas' cost of capital estimate be before your purchase decision would change?
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Authors: Paula H. Song, Kristin L. Reiter
3rd Edition
1567939759, 978-1567939750
