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

FastTrack​ Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $201,000 per year. Once in​ production, the bike is expected to make $281,400 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 is13%​?

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