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19. OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost S500 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%. Using an Excel spreadsheet, identify the IRR of the new ship Should OpenSeas go ahead with the purchase? How far off could OpenSeas cost of capital estimate be before your purchase decision would change? (a) IRR-12.72%, Yes, 0.72% (b) IRR-1 1.25%, No, 0.75% (c) IRR-14.82%, Yes, 2.82% (d) IRR-9.34%, Yes, 2.66% 20. Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts NPV $2 million $1 million $1.5 million Use of Facility 100% 60% 40% (a) Invest in A (b) First invest in B, then in C (c) First invest in C, then in B (d) Invest in C

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Home nert Page Layout Formulas Data Review View dd-Ins Cut E AutoSum Wrap Text aCopy в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Format Sort &Find & 2 ClearFe Select Edting Format Painter Formatting, as Table w styles. ▼ ㆆ ▼ Clipboard Alignment Number Cells FT61 FIMM FN FP FR FS GB year CF IRR- 12.72% IRR(FP49:FP69) 51 52 53 NPV- 22.86 NPV(12%,FP50:FP69) +FP49 70 70 ANS : a : IRR-12.72%, YES , 0.72% 57 70 59 10 70 61 70 13 70 16 17 18 19 70 67 70 69 70 /4 MIRR NpV IRR REPLACEMENTS HPR GMAM EAC MACRS LEASE RATIOCASHBUDGE wacc BOND EPS EBIT REPLACEMENT . STats NPV BETA LEVERED - - erences: NI296 福 11096Home nert Page Layout Formulas Data Review View dd-Ins Cut ta copy. ー E ゴWrap Text Σ AutoSum Format Painter в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting, as Table w styles. ▼ ㆆ ▼ Sort &Find & 2 ClearFe Select Edting Clipboard Alignment Number Cells FU76 FM FN FO FP FQ FR FS FT FU FV FW FX 71 72 73 74 75 76 FY CONTRACTS NPV USE OF FACILITY 100% PROFITABILITY INDEX 2.0000 1.6667 3.7500 1.5 78 79 80 81 82 83 84 85 86 87 ANSWER: C FIRST INVEST IN C THEN IN B NPV FOR B AND C (COMBINED) 1+1.5 2.5 WHICH IS HIGHER THAN CONTRACT A-2 89 (4 く トト1 | | MIRR NpV IRR REPLACEMENT S . . HPR GMAM LEASE . . RATIOCASHBUDGET / wacc . BOND EAC MACRS EPS EBIT REPLACEMENT (STats BETA LEVERED erences: NI296 福 130% ..al @m * 4c ENG 10:11 24-01-2019

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