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FastTrack​ Bikes, Inc. is thinking of developing a new composite road bike. The development will take...

FastTrack​ Bikes, Inc. is thinking of developing a new composite road bike. The development will take six years and the cost is $ 188000 per year. Once in​ production, the bike is expected to make $ 282000 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 13 %​? Note​: Assume that all cash flows occur at the end of the appropriate year and that the inflows do not start until year 7.

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