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FastTrack Bikes, Inc s thinking of developing a new composite road bike. Development will take six years and he cost is $200 00 per year.
FastTrack Bikes, Inc s thinking of developing a new composite road bike. Development will take six years and he cost is $200 00 per year. O ce np o u bike is expected to make $300,000 per year for 10 years. The cash inflows begin at the end of year 7. For parts a-c, assume the cost of capital is 10.0%. a. Calculate the NPV of this investment opportunity. 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'? o e d. Calculate the NPV of this investment opportunity. Should the company make the investment? e. How much must this cost of capital estimate deviate to change the decision? f. How long must development last to change the decision? a. Calculate the NPV of this investment opportunity If the cost of capital is 100%, the NPV is $1 . (Round to the nearest dollar) Should the company make this investment? (Select the best choice below.) O A. Reject the investment because the NPV is less than zero ($0) O B. Accept the investment because the NPV is equal to or greater than zero (S0) O C. Accept the investment because the NPV is equal to or less than zero ($0)
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