Solution-Calculate the npv of investment opportunity

Calculate the npv of investment opportunity

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Reference no: EM132951974

FastTrack? Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $200,400 per year. Once in? production, the bike is expected to make $302,800 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 $200,400 per? year, how long must development last to change the? decision?

Assume the cost of capital is 14.8% 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 $200,400 per? year, how long must development last to change the? decision?

Reference no: EM132951974

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Calculate the npv of investment opportunity

Reference no: EM132951974

Reference no: EM132951974

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