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please answer all parts fir a like FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and
please answer all parts fir a like
FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $203,000 per year. Once in production, the bike is expected to make $304,500 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 14% ? Note: Assume that all cash flows occur at the end of the appropriate vear and that the inflows do not start until vear 7. The present value of the costs is $ (Round to the nearest dollar.) The present value of the benefits is $ (Round to the nearest dollar:) The net present value is $ (Round to the nearest dollar) You should the investment because the NPV is (Select from the drop-down menus.) 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 \%. (Round to two decimal places.) c. What is the NPV of the investment if the cost of capital is 14% ? The present value of the costs is $ (Round to the nearest dollar.) The net present value is $ (Round to the nearest doliar.) You should the investment because the NPV is (Select from the drop-down menus.) 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 \%. (Round to two decmal places.) c. What is the NPV of the investment if the cost of capital is 14% ? The present value of the costs is $ (Round to the nearest dollar.) The present value of the benefits is $ (Round to the nearest dollar.) The NPV will be s (Round to the nearest dollar.) Step by Step Solution
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