OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $ million, and would operate for
years. OpenSeas expects annual cash flows from operating the ship to be $ million at the end of each year and
its cost of capital is
a Prepare an NPV profile of the purchase using discount rates of and
b Identify the IRR to the nearest on a graph.
c Is the purchase attractive based on these estimates?
d How far off could OpenSeas' cost of capital be to the nearest before your purchase decision would change?
Note: Subtract the discount rate from the actual IRR. Use Excel to compute the actual IRR.
The NPV for a discount rates of is $ million. Round to the nearest integer.
The NPV for a discount rates of is $ million. Round to the nearest integer.
The NPV for a discount rates of is $ million. Round to the nearest integer.
b Identify the IRR to the nearest on a graph.
