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Question parts C to F please FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the
Question parts C to F please
FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $198,800 per year. Once in production, the bike is expected to make $295,304 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 9.6%. 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? For parts d-t, assume the cost of capital is 14.4% 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? c. How long must development last to change the decision? For the decision to change, development must last years, or longer. (Round to two decimal places.) d. Calculate the NPV of this investment opportunity. Should the company make the investment? be If the cost of capital is 14.4%, the NPV is $(Round to the nearest dottar.) Should the company make the investment? (Select the best choice below.) O A Reject the investment because the NPV is less than zero (50). OB. Accept the investment because the NPV is equal to or greater than zero (50). OC. Reject the investment because the NPV is equal to or greater than zero (50) OD. Accept the investment because the NPV is equal to or less than zero (50). e. How much must this cost of capital estimate deviate to change the decision? Click to select your answers) Step by Step Solution
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