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openseas inc is evaluating the purchase of a new cruise ship the ship would cost 500 737641

OpenSeas, Inc., is evaluating the purchase of a new cruise ship. The ship would cost

$500 million, but would operate for 20 years. OpenSeas expects annual cash flows

from operating the ship to be $70 million and its cost of capital is 12%. a. Prepare an NPV profile of the purchase.

b. Identify the IRR on the graph.

c. Should OpenSeas go ahead with the purchase?

d. How far off could OpenSeas’ cost of capital estimate be before your purchase deci sion would change?

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