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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?
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