OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $$503$ million, and would operate for

$20$ years. OpenSeas expects annual cash flows from operating the ship to be $$71\mathrm{.}8$ million $($at the end of each year$)$ and

its cost of capital is $12\mathrm{.}2\%$

a$.$ Prepare an NPV profile of the purchase using discount rates of $2\mathrm{.}0\%,11\mathrm{.}5\%$ and $17\mathrm{.}0\%.$

b$.$ Identify the IRR $($to the nearest $1\%)$ on a graph.

c$.$ Is the purchase attractive based on these estimates?

d$.$ How far off could OpenSeas' cost of capital be $($to the nearest $1\%)$ before your purchase decision would change?

Note: Subtract the discount rate from the actual IRR. Use Excel to compute the actual IRR.

The NPV for a discount rates of $2\mathrm{.}0\%$ is $$671\mathrm{.}03$ million. $($Round to the nearest integer.$)$

The NPV for a discount rates of $11\mathrm{.}5\%$ is $$50\mathrm{.}56$ million. $($Round to the nearest integer.$)$

The NPV for a discount rates of $17\mathrm{.}0\%$ is $$-98\mathrm{.}93$ million. $($Round to the nearest integer.$)$

b$.$ Identify the IRR $($to the nearest $1\%)$ on a graph.