Calculate the npv of investment opportunity

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FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $195,000 per year. Once in production, the bike is expected to make $312,000 per year for 10 years. Assume the cost of capital is 10%.

a. Calculate the NPV of this investment opportunity, assuming all cash flows occur at the end of each year. Should the company make the investment?

b. By how much must the cost of capital estimate deviate to change the decision? (Hint: Use Excel to calculate the IRR.)

c. What is the NPV of the investment if the cost of capital is 14%? Note: Assume that all cash ?ows occur at the end at the appropriate year and that the in?ows do not start until year 7.

a. Calculate the NPV of this investment opportunity, assuming all cash ?ows occur at the end of each year. Should the company make the investment? The present value of the costs is $ 549276 . (Round to the nearest dollar.) The present value of the bene?ts is $D. (Round to the nearest dollar.)

Reference no: EM133118594

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