FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost i$208,600

per year. Once in production, the bike is expected to make $286,796 per year for 10years. The cash inflows begin at the end of year 7.

For parts a-c, assume the cost of capital is 9.2%.

a. Calculate the NPV of this investment opportunity. (Round to the nearest dollar.)

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?

For parts d-f, assume the cost of capital is14.1%.

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

the NPV in this case is _____

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

To change the decision, the deviation would need to be ____%.

f. How long must development last to change the decision? _____ years