Seashore Inc., is assessing the purchase of a new ship. The ship will cost $497 million and will operate for 20 years. The company estimates annual cash flows from operating the ship to be $71.1 million, and its cost of capital is 12.5%.

1. Calculate the NPV and IRR of the purchase.
2. Prepare an NPV profile of the purchase and highlight the IRR.
3. Should the company proceed with the purchase?
4. How far off could the firms cost of capital estimate be before your purchase decision would change?