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

is $$206,000$ per year. Once in production, the bike is expected to make $$309,000$ per year for $10$ years. Assume the cost

of capital is $10\%.$

a$.$ Calculate the NPV of this investment opportunity, assuming all cash flows occur at the end of each year. Should the

company make the investment?

b$.$ By how much must the cost of capital estimate deviate to change the decision? $($Hint: Use Excel to calculate the IRR.$)$

c$.$ What is the NPV of the investment if the cost of capital is $14\%?$

Note: Assume that all cash flows occur at the end of the appropriate year and that the inflows do not start until

year $7.$