Estimate be before your purchase decision would? change

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Question: ?OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $498 ?million, and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $69.6 million and its cost of capital is 12.2%.

a. To plot the NPV profile we compute the NPV of the project for various discount rates and plot the curve. The NPV for a discount rate of 2.0% is ?

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 decision would? change?

Reference no: EM133377586

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