FastTrack bikes, inc. Is thinking of developing a new composite road bike. Development will take six years and the cost is $200,000 per year. Once in production, the bike is expected to make 300,000 per year for 10 years. The cash flows begin at the end of year seven.

a. What is 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. With cost remain at 200,000 per year, how long must development last to change the decision? Assume the cost capital is 14.0 % for parts (d), (e), and (f).

d. Calculate the MPV of this investment opportunity. Should the company make the investment?

e. How much must the cost of capital estimate deviate to changed the decision?

f. With costs remaining at 200,000 per year, how long must development last to change the decision?

If the cost of capital is 10% what is the NPV rounded to the nearest dollar?