FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $199,200 per year. Once in production, the bike is expected to make $285,017 per year for 10 years. The cash inflows begin at the end of year 7. Assume the cost of capital is 9.9%.

c. How long must development last to change the decision? (4 marks)

1. 2.56 years
2. 4.64 years
3. 6.65 years
4. 8.95 years
5. 10.81 years.