Calculate the NPV of this investment​ opportunity, assuming all cash flows occur at the end of each year. Should the company make the​ investment? The present value of the costs is how much(Round to the nearest​dollar.) By how much must the cost of capital estimate deviate to change the​ decision? (Hint​: Use Excel to calculate the​ IRR.) What is the NPV of the investment if the cost of capital is 15%​? (Round to two decimal places)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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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 $176,000 per year. Once in​ production, the bike is expected to make $281,600 per year for 10 years. Assume the cost of capital is 10%.

  1. Calculate the NPV of this investment​ opportunity, assuming all cash flows occur at the end of each year. Should the company make the​ investment? The present value of the costs is how much(Round to the nearest​dollar.)
  2. By how much must the cost of capital estimate deviate to change the​ decision?

(Hint​: Use Excel to calculate the​ IRR.)

  1. What is the NPV of the investment if the cost of capital is 15%​? (Round to two decimal places)

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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