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Prepare an npv profile of the purchase

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Reference no: EM132645303

OgenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $500 million, and would operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70 million (at the end of each year) and its cost of capital is 12%.

Question a. Prepare an NPV profile of the purchase.

Question b. Estimate the IRR (to the nearest 1%) from the graph.

Question c. Is the purchase attractive based on these estimates?

Question d. How far off could OgenSeas' cost of capital be (to the nearest 1%) before your purchase decision would change?

Reference no: EM132645303

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