With the market for luxury cruises burgeoning, McMaster Cruise Lines is debating whether to invest in a large cruise ship to serve what would be a new market for the companycruises around Alaska. This is not a small investment: McMaster management figures that the new TSX vessel will cost approximately $375 million. Spread over 25 years (the useful life of the ship), this amounts to a fixed cost of $375 million/25 = $15 million per year. The new ship can carry 2,000 passengers at a time, or up to 40,000 per year. Management has determined that the average passenger will generate revenues of $2,400 and variable costs of $1,300

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To evaluate whether investing in the new cruise ship is financially viable McMaster Cruise Lines nee... View the full answer