Question: Superfast Bikes is thinking of developing a new composite road bike. Development will take 6 years and the cost is $208,500 per year. Once in
Superfast Bikes is thinking of developing a new composite road bike. Development will take 6 years and the cost is $208,500 per year. Once in production, the bike is expected to make $296, 102 per year for 10 years. The cash inflows begin at the end of year 7. Assuming the cost of capital is 10.3% per annum: a. The NPV of this investment opportunity is (Round your answer to the nearest dollar The company should make this investment. (Select the best choice below) (No answer given) b. The IRR of this investment opportunity is {Round your answer to two decimal places) Note: The IRR for this question will require Excel or a financial calculator. Students will not be required to do this in an exam unless you are told explicitly to do so. If the cost of capital is 10.3%, the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged is (Round your answer to two decimal places. Your answer should include the appropriate positiveegative sign) years. c. For the decision to change development must last (Round your answer to two decimal places) Assuming now that the cost of capital is instead 14.8% per annum: d. The NPV of this investment opportunity is S (Round your answer to the nearest dollar (A positive NPV answer does not require a sign. A negative NPV requires you to use the "sign) The company should make this investment Select the best choice below) (No answer given) e. If the cost of capital is 14.8%, the maximum deviation allowable in the cost of capital estimate to leave the decision changed is (Round your answer to two decimal places. Your answer should include the appropriate positiveegative sign.) years f. For the decision to change, development must last (Round your answer to two decimal places
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