3) ICF, Inc., is thinking of developing a new no sugar ice cream. Development will take 7 years and the cost is $230,000 per year. Once in production, the Ice Cream is expected to make $350,000 per year for 10 years. The cash inflows begin at the end of year 7. Assuming the cost of capital is 10%:

a. Calculate the NPV of this investment opportunity. Should the company make the investment?

b. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

c. How long must development last to change the decision?