FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $ $181$ comma $000$ per year. Once in production, the bike is expected to make $ $271$ comma $500$ 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 $15\%?$

Note: Assume that all cash flows occur at the end of the appropriate year and that the inflows do not start until year $7.$

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Part $1$

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?

The present value of the costs is $?$

Part $2$

The present value of the benefits is $?$

Part $3$

The net present value is $?$

$.$

Part $5$

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

To change the decision, the deviation would need to be $\%.?$

Part $6$

c$.$ What is the NPV of the investment if the cost of capital is $15\%?$

The present value of the costs is $?$

Part $7$

The present value of the benefits is $?$

Part $8$

The NPV will be $?$