FastTrack Bikes, Inc is thinking of developing a new composite road bike Development will take six years and the cost is $196.000 cash inlows begin at the end of year 7 For parts assume the cost of capital 99% per year Once in production, the bike is expected to make $,29,591 per year for 10 years. The Calculabe the NiPV of this investment opportunity Should the company make the investment? b. Calc ate te IRR ard use to determine the maximum denabon allowable n the cost of captal estimate to leave the decision unchanged c. How long must development last to change the decision? For parts d-t, assume the cost of captal s 139% d. Calculate the NPV of this investment opportunity Should the company make the investment? e. How much musit this cost of capital estmate deviahe to change the decision? f. How long must development last to change the decision? a. Calulate the NPV of this investment opportunity "Pe cost of captal 99%, "o NPV-S0 (Rond to the nearest dollar) Should the company make this nvestment? (Select the best choice below) O A Accept the investment because the NPV is equal to or greater than zero (50) . Accept the investment because the NPV is equal to or less than zero (SO) OC. Reet te nvestment because te NPV s equal to or greater than zero (so) O D. Reject the investment because the NPV is less than zero (30) b. Calculate the IRR and use it to determine The IRR is[]%, (Round to two decimal places) If the cost of capital is 9996, the maximum de at onis % (Round to to decimal places) c. How long must development last to change the decision? For the decision to change, development must lastyears, or longer. (Round to two decimal places) d. Calculate the NPV of this investment opportunity Should the company make the investment? If the cost of capital is 13.9%, the NPV is SD (Round to the nearest dollar ) the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. d. Calculate the NPV of this investment opportunity. Should the company make the investment? If the cost of capital is 13.9%, the NPV is S[]. (Round to the nearest dollar) Should the company make the investment? (Select the best choice below.) O A. Accept the investment because the NPV is equal to or less than zero (50). O B. Reject the investment because the NPV is equal to or greater than zero ($0) 1 O C. Reject the investment because the NPV is less than zero (S0). O D. Accept the investment because the NPV is equal to or greater than zero (S0). e. How much must this cost of capital estimate deviate to change the decision? e. How much must this cost of capital estimate deviate to change the decision? The maximum deviation is % (Round to two decimal places) f. How long must development last to change the decision? For the decision to change. development must last no longer thanyears. (Round to two decimal places.)
