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Question $1$

Question $2$

Question $3$

Question $4$

Question $5$

Question $6$

Question $7$

Question $8$

Question $9$

Question $10$

Question $11$

Question $12$

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Part $1$

FastTrack$$ Bikes, Inc. is thinking of developing a new composite road bike. Development will take $6$ years and the cost is $ $206$ comma $100$ per year. Once in$$ production, the bike is expected to make $$$$289$ comma $500$ per year for $10$ years. The cash inflows begin at the end of year $7.$

Assume the cost of capital is $10\mathrm{.}6\%$ 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 $ $206$ comma $100$ per$$ year, how long must development last to change the$$ decision?

Assume the cost of capital is $14\mathrm{.}5\%$ 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 $ $206$ comma $100$ 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 $10\mathrm{.}6\%,$ the NPV is $$1.($Round to the nearest dollar.$)$