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Superfast Bikes is thinking of developing a new composite road bike. Development will take six years and the cost is $196 000 per year. Once

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Superfast Bikes is thinking of developing a new composite road bike. Development will take six years and the cost is $196 000 per year. Once in production, the bike is expected to make $299 893 per year for 10 years. The cash inows begin at the end at year 7. Assuming the cost of capital is 10.7%: a. Calculate the NPVof this investment opportunity. Should the company make the investment? b. Calculate the (RR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. 1:. How long must development lastto change the decision? Assume the cost of capital is 13.1%. d. Calculate the NPV of this investment opportunity. Should the company make the investment? 9. How much must this cost at capital estimate deviate to change the decision? f. How long must development last to change the decision

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