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OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $497 million, and would operate for 20 years. OpenSeas expects
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $497 million, and would operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $71.1 million (at the end of each year) and its cost of capital is 12.5%. a. Prepare an NPV profile of the purchase. b. Estimate the IRR (to the nearest 1%) from the 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
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