OpenSeas , Inc. is evaluating the purchase of a new cruise ship. The ship will cost $
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Question:
OpenSeas Inc. is evaluating the purchase of a new cruise ship. The ship will cost $ million and will operate for years. OpenSeas expects annual cash flows from operating the ship to be $ million and its cost of capital is
a Prepare an NPV profile of the purchase. Prepare an NPV profile of the purchase.
To plot the NPV profile, we compute the NPV of the project for various discount rates and plot the curve.
Part
The NPV for a discount rate of is $
enter your response here million. Round to one decimal place.
b Identify the IRR on the graph.
c Should OpenSeas go ahead with the purchase?
d How far off could OpenSeas's cost of capital estimate be before your purchase decision would change?
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