OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $501 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.

The NPV for a discount rate of 2.0% is?

The NPV for a discount rate of 11.5% is?

The NPV for a discount rate of 17.0% is?

B. Identify the IRR on the graph.

The approximate IRR from the graph is what percent?

C. Should OpenSeas proceed with the purchase and at what discount rate?

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

The cost of capital estimate can be off by what percentage?