OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $502 million, but would operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $71.1 million​ (at the end of each​ year) and its cost of capital is 12.4% a. Prepare an NPV profile of the purchase using discount rates of 2.0%​, 11.5% and 17.0%. b. Identify the IRR ​(to the nearest​ 1%) on a graph. c. Is the purchase attractive based on these​ estimates? d. How far off could​ OpenSeas? cost of capital be​ (to the nearest​ 1%) before your purchase decision would​ change?Note​: Subtract the discount rate from the actual IRR. Use Excel to compute the actual IRR.

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.