Net Present Value Method Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 2.700 passengers and cost $540 million to build. Assume the following additional information There will be 300 cruise days per year operated at a full capacity of 2.700 passengers The variable expenses per passenger are estimated to be $95 per cruise day. The revenue per passenger is expected to be $475 per cruise day Tha fixad axpansas for running tha ship, othar than dapraciation, ara astimatad to ba $80,028,000 par year Tha ship has a servica lifa of 10 years, with a rasidual value of $90,000,000 at the and of 10 years Present Value of $1 at Compound Interest Present Value of an Annuity of $1 at Compound Interest 096 10% 12% 15% 20% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.6732.4872.402 2.283 2.106 4 3.4653.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.9174.3554.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 60% 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0792 0.683 0.636 0.572 0.482 5 07470.621 0.567 0.497 0.402 6 0705 0.564 0.507 0432 0,335 0.665 0.513 0.452 0.376 0.279 0.627 0.467 0,404 0.327 0.233 0.592 0424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Determine the annual net cash flow from operating the cruise ship. 384,750,000 76.950,000 Variable expenses Fixed expenses Annual net cash ow b. Determine the net present value of this investment, assuming a 10% minimum rate of return. Use the present value tables provided above. If required, round to the nearest whole dollar. Present value of annual net cash flows Present value ofresidual value Total present value Amount to be invested Net prasent value 227,772,000 1,399,658,940 1,399,658,940 X Feedoack a. Subtract the variable axpansas and fixad axpensas (axcopt dopraciation) from tha revenues (numbar of passengers x rate x number of days). b. Add the present value of the annual net cash flows annual net cash flows multiplied by the present value of an annuity actor or 10 periods at 10% and the present value of the residual value. Subtract the amount to be invested