FastTrack Bikes, Inc. is thinking of developing a new compositeroad bike. Development will take six years and the cost is $ 206comma 200$206,200 per year. Once in production, the bike isexpected to make $ 290 comma 604$290,604 per year for 1010 years.The cash inflows begin at the end of year 7.For parts a-c, assumethe cost of capital is 9.6 %9.6%. a. Calculate the NPV of this investment opportunity. Should thecompany make the investment? b. Calculate the IRR and use it to determine the maximumdeviation allowable in the cost of capital estimate to leave thedecision unchanged. c. How long must development last to change the decision? Forparts d-f, assume the cost of capital is 14.6 %. d. Calculate the NPV of this investment opportunity. Should thecompany make the investment? e. How much must this cost of capitalestimate deviate to change the decision? f. How long mustdevelopment last to change the decision? . . .
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