Business, 21.02.2020 17:26 des264

FastTrack Bikes, Inc., is thinking of developing a new composite road bike. Development will take 6 years and the cost is $200,000 per year. Once in production, the bike is expected to make $300,000 per year for 10 years. The cash inflows begin at the end of year 7.Assuming the cost of capital is 10%:

a. Calculate the NPV of this investment opportunity. Should the company make the investment?

b. Calculate the IRR (use Excel or a calculator) and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged?

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FastTrack Bikes, Inc., is thinking of developing a new composite road bike. Development will take 6...

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