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FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take years and the cost is $ comma per year. Once in production, the bike is expected to make $ comma per year for years. The cash inflows begin at the end of year
Assume the cost of capital is for parts ab and c below.
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 With costs remaining at $ comma per year, how long must development last to change the decision?
Assume the cost of capital is for parts de and f below.
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 With costs remaining at $ comma per year, how long must development last to change the decision? a Calculate the NPV of this investment opportunity.
If the cost of capital is the NPV is $Round to the nearest dollar.
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