Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 7, Problem 7P

OpenSeas, 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%.

  1. a. Prepare an NPV profile of the purchase.
  2. b. Estimate the IRR (to the nearest 1%) from the graph.
  3. c. Is the purchase attractive based on these estimates?
  4. d. How far off could OpenSeas’ cost of capital be (to the nearest 1 %) before your purchase decision would change?
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OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $500 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $68.9 million and its cost of capital is 11.6%. 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's cost of capital estimate be before your purchase decision would change? ame a. Prepare an NPV profile of the purchase. 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 $ million. (Round to one decimal place.)
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $500 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $71.7 million and its cost of capital is 12.4%. 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's 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 $504 million and will operate for 20 years. Open Seas expects annual cash flows from operating the ship to be $68.6 million and its cost of capital is 11.7%. 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's cost of capital estimate be before your purchase decision would change? a. Prepare an NPV profile of the purchase. 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 $ million. (Round to one decimal place.)

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Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book

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