OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $$499$ million, and will operate for $20$ years. OpenSeas expects annual cash flows from operating the ship to be $$71\mathrm{.}9$ million and its cost of capital is $12\mathrm{.}4\%.$

a$.$ Prepare an NPV profile of the purchase.

b$.$ Identify the IRR on the graph.

c$.$ Should OpenSeas proceed with the purchase?

d$.$ How far off could OpenSeas' cost of capital estimate be before your purchase decision would change?

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 $2\mathrm{.}0\%$ is $$676\mathrm{.}7$ million. $($Round to one decimal place.$)$

The NPV for a discount rate of $11\mathrm{.}5\%$ is $$$ million. $($Round to one decimal place.$)$