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Superfast Bikes is thinking of developing a new composite road bike. Development will take six years and the cost is $ 2 0 3 comma
Superfast Bikes is thinking of developing a new composite road bike. Development will take six 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
Assuming the cost of capital is :
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?
Assume the cost of capital is
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?
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