Hi there, I am working on this problem from my textbook, can you please show me the steps in solving this problem without using excel? Fast Bikes Ltd. is thinking of making a new bike. It will take 6 years to develop with a cost of $200,000 per year. Once in production, the bike is expected to make $300,000 each year for 10 years. The cost of capital is 10%. Calculate the NPV
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Hi there,
I am working on this problem from my textbook, can you please show me the steps in solving this problem without using excel?
Fast Bikes Ltd. is thinking of making a new bike. It will take 6 years to develop with a cost of $200,000 per year. Once in production, the bike is expected to make $300,000 each year for 10 years. The cost of capital is 10%. Calculate the NPV
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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 $200,000 per year. Once in production, the bike is expected to make $300,000 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 flows occur at the end of the appropriate year and that the inflows do not start until year 7.FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six 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. 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 flows occur at the end of the appropriate year and that the inflows do not start until year 7.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%. 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 nearestdollar.) 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) Note: Assume that all cash flows occur at the end of the appropriate year and that the inflows do not start until year 7.
- Superfast Bikes is thinking of developing a new composite road bike. Development will take 6 years and the cost is $208,500 per year. Once in production, the bike is expected to make $296,102 per year for 10 years. The cash inflows begin at the end of year 7. Assuming the cost of capital is 9.9% per annum: a. The NPV of this investment opportunity is $.(Round your answer to the nearest dollar) Should the company make this investment? b. The IRR of this investment opportunity is %.(Round your answer to two decimal places) Note: The IRR for this question will require Excel or a financial calculator. Students will not be required to do this in an exam unless you are told explicitly to do so. If the cost of capital is 9.9%, the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged is %.(Round your answer to two decimal places. Your answer should include the appropriate positive/negative sign.) c. For the decision to change, development must…FastTrack Bikes Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $184,000 per year. Once in production, the bike is expected to make $276,000 per year for 10 years. Assume the cost of capital is 10%. a. Calculate the NPV of this investment opportunity. Should the company make the investment? b. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged (Hint: Use Excel to calculate the IRR.) c. Calculate the NPV of this investment opportunity assuming the cost of capital is 13%. Should the company make the investment given this new assumption? Note: Assume that all cash flows occur at the end of the appropriate year and that the the inflows do not start until year 7. a. Calculate the NPV of this investment opportunity. Should the company make the investment? The present value of the costs is $ (Round to the nearest dollar.)FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $213,000 per year. Once in production, the bike is expected to make $319,500 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 flows occur at the end of the appropriate year and that the inflows do not start until year 7. 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? The present value of the costs is $ (Round to the nearest dollar.) The present value of the benefits is $. (Round to the nearest…
- FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $199,500 per year. Once in production, the bike is expected to make $303,531 per year for 10 years. The cash inflows begin at the end of year 7. For parts a-c, assume the cost of capital is 10.5%. a. Calculate the NPV of this investment opportunity. Should the company make the investment? b. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. c. How long must development last to change the decision? For parts d-f, assume the cost of capital is 13.3%. d. Calculate the NPV of this investment opportunity. Should the company make the investment? e. How much must this cost of capital estimate deviate to change the decision? f. How long must development last to change the decision?← FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $214,500 per year. Once in production, the bike is expected to make $296,481 per year for 10 years. The cash inflows begin at the end of year 7. For parts a-c, assume the cost of capital is 9.5%. a. Calculate the NPV of this investment opportunity. Should the company make the investment? b. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. c. How long must development last to change the decision? For parts d-f, assume the cost of capital is 14.2%. d. Calculate the NPV of this investment opportunity. Should the company make the investment? e. How much must this cost of capital estimate deviate to change the decision? f. How long must development last to change the decision? a. Calculate the NPV of this investment opportunity. If the cost of capital is 9.5%, the NPV is $.…FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $207,800 per year. Once in production, the bike is expected to make $292,039 per year for 10 years. The cash inflows begin at the end of year 7. For parts a-c, assume the cost of capital is 9.6%. a. Calculate the NPV of this investment opportunity. Should the company make the Investment? b. Calculate the IRR and use it to determine the maximum devlation alowable in the cost of capital estimate to leave the decision unchanged. c. How long must development last to change the decision? For parts d-f, assume the cost of capital is 13.1%. d. Calculate the NPV of this investment opportunity, Should the company make the investment? e. How much must this cost of capital estimate deviate to change the decision? f. How long must development last to change the decision?
- FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $207,800 per year. Once in production, the bike is expected to make $292,039 per year for 10 years. The cash inflows begin at the end of year 7. For parts a-c, assume the cost of capital is 9.6%. a. Calculate the NPV of this investment opportunity. Should the company make the Investment? b. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. c. How long must development last to change the decision? For parts d-f, assume the cost of capital is 13.1%. d. Calculate the NPV of this investment opportunity. Should the company make the investment? e. How much must this cost of capital estimate deviate to change the decision? f. How long must development last to change the decision?K Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.98 million. The product is expected to generate profits of $1.09 million per year for 10 years. The company will have to provide product support expected to cost $98,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 5.6%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.6% and 14.5%, respectively. b. What is the IRR of this investment opportunity? c. What does the IRR rule indicate about this investment? a. What is the NPV of this investment if the cost of capital is 5.6%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.6% and 14.5%, respectively. If the cost of capital is 5.6%, the NPV will be $ (Round to the nearest dollar.) Should the firm undertake the project? (Select the best choice…Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.98 million. The product is expected to generate profits of $1.15 million per year for 10 years. The company will have to provide product support expected to cost $99,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 5.6% ? Should the firm undertake the project? Repeat the analysis for discount rates of 1.3% and 16.3%, respectively. b. What is the IRR of this investment opportunity? c. What does the IRR rule indicate about this investment? a. What is the NPV of this investment if the cost of capital is 6.2%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.1% and 17.8%, respectively. If the cost of capital is 6.2%, the NPV will be $ (Round to the nearest dollar.) answer this Should the firm undertake the project? (Select the…
