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?OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $...

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Finance

?OpenSeas, Inc. is evaluating the purchase of a new cruise ship.The ship will cost $ 495 ?million, and will operate for 20 years.OpenSeas expects annual cash flows from operating the ship to be $70.7 million and its cost of capital is 12.1 %. a. Prepare an NPVprofile of the purchase. b. Identify the IRR on the graph. c.Should OpenSeas proceed with the? purchase? d. How far off could?OpenSeas' cost of capital estimate be before your purchase decisionwould? change?

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3.6 Ratings (378 Votes)
aNPV CalculationInitial inflow 495 MillionAnnual inflow 707 MillionInflow Years 20Cost of capital or discount rate 121So NPV will beYearCash Inflow In Millions Discounted Value CalculationFinal Value In Millions    See Answer
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?OpenSeas, Inc. is evaluating the purchase of a new cruise ship.The ship will cost $ 495 ?million, and will operate for 20 years.OpenSeas expects annual cash flows from operating the ship to be $70.7 million and its cost of capital is 12.1 %. a. Prepare an NPVprofile of the purchase. b. Identify the IRR on the graph. c.Should OpenSeas proceed with the? purchase? d. How far off could?OpenSeas' cost of capital estimate be before your purchase decisionwould? change?

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