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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
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 $69.6 million (at the end of each year). Should you accept or reject the project if the cost of capital is 2% Reject because IRR =3%, which is greater than the cost of capital Reject because IRR=13%, which is greater than the cost of capital Accept because IRR =3%, which is greater than the cost of capital Accept because IRR =13%, which is greater than the cost of capital
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