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Speedy Bikes, Inc. is thinking of developing a new all-road bike. Development will take six years and the cost is $199,000 per year. Once in
Speedy Bikes, Inc. is thinking of developing a new all-road bike. Development will take six years and the cost is $199,000 per year. Once in production, the bike is expected to make $298,500 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. PV of the cost = $ (round to the nearest dollar) PV of the benefits= $ (round to the nearest dollar) NPV = $ (round to the nearest dollar) 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
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