Purchase Solution

maximum deviation allowable

Not what you're looking for?

Ask Custom Question

Fast Track 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.
a. Assume the cost of capital is 10%.
i. Calculate the NPV of this investment opportunity. Should the company make the investment?
ii. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.
iii. How long must development last to change the decision?

Purchase this Solution
Solution Summary

Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

View More Free Quizzes
Related BrainMass Solutions

  • Maximum Tolerable Error

    Without the actual mean, how can I calculate the maximum tolerable error? I am using: maximum allowable error = (z-value * standard deviation)/sq root of sample size. This does not make sense to me.

  • Should You Take the Investment Opportunity?

    Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

  • Calculating a Confidence Interval

    The size of the population is irrelevant but in order to find the sample size, we need the population (or sample) standard deviation, maximum allowable error and the level of confidence.

  • Statistical Symbols: Match the symbols to the explanation

    Population standard deviation 6. c2 (Chi Square) ____ f. Alternate hypothesis 7. ! ____ g. Maximum allowable error 8. H0 ____ h. Population mean 9. H1 ____ i.

  • Calculating NPV and IRR to Determine Maximum Deviation

    Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

  • Determine the maximum allowable stress

    160090 Determine the maximum allowable stress Knowing that, for the plate shown (see attachment), the allowable stress is 24 ksi, determine the maximum allowable value of P when r = 3/4 in.

  • Statistical Symbols and Definitions Matching Exercise

    Symbols such as Uppercase Sigma, Mu, Lowercase Sigma, Pi, Epsilon, Chi Square etc are matched to their definitions including null hypothesis, summation, Factorial, nonparametric hypothesis test, Population standard deviation, alternate hypothesis, maximum

  • Ohm"s Law: Shocking voltage.

    Calculate the maximum allowable voltage without shock across the thumb and index finger with a dry-skin resistance of 3.25E+5Ω. Part 2 Calculate the maximum allowable voltage with a wet-skin resistance of 1810 ohm.

  • This posting addresses investment NPV and IRR calculations.

    Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capitol estimate to leave the decision unchanged. Solution attached.

View More Related Solutions