Question: FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $211,400 per year. Once

FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $211,400 per year. Once in production, the bike is expected to make $289,900 per year for 10 years. The cash inflows begin at the end of year 7. Assume the cost of capital is 10.6% for parts (a), (b), 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 $211,400 per year, how long must development last to change the decision? Assume the cost of capital is 13.9% for parts (d), (e), 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 $211,400 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 10.6%, the NPV is $ 32919 32919. (Round to the nearest dollar.) Should the company make this investment?(Select the best choice below.) A. Reject the investment because the NPV is less than zero ($0). B. Accept the investment because the NPV is equal to or less than zero ($0). C. Reject the investment because the NPV is equal to or greater than zero ($0). D. Accept the investment because the NPV is equal to or greater than zero ($0). b. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. The IRR is 11.3 11.3%. (Round to two decimal places.) If the cost of capital is 10.6%, the maximum deviation is 0.7 0.7%. (Round to two decimal places.) c. How long must development last to change the decision? For the decision to change, development must last nothing years, or longer. (Round to two decimal places.) d. Calculate the NPV of this investment opportunity. Should the company make the investment? If the cost of capital is 13.9%, the NPV is $ 125685 125685. (Round to the nearest dollar.)

e. How much must this cost of capital estimate deviate to change the decision? The maximum deviation is ________%. (Round to two decimal places.)

f. How long must development last to change the decision? For the decision to change, development must last no longer than __________years.(Round to two decimal places.)

ONLY need C, E and F

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