OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost 3500 million, and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.0 million and its cost of capital is 2.0%. a. Prepare an NPV profile of the purchase. D. 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?

OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost 3500 million, and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.0 million and its cost of capital is 2.0%. a. Prepare an NPV profile of the purchase. D. 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?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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