Go-Power Batteries has developed a high-voltage nickelmetal hydride battery that can be used to power a hybrid
Question:
Go-Power Batteries has developed a high-voltage nickel–metal hydride battery that can be used to power a hybrid automobile. It can sell the technology immediately to Toyota for \($10\) million, or alternatively, Go-Power Batteries can invest \($50\) million in a plant and produce the batteries for itself and sell them. Unfortunately, given the current size of the market for hybrids, the present value of the cash flows from such a plant would be only \($40\) million, implying that the plant has a negative expected NPV of –\($10\) million. What are the real options that are being ignored in this analysis? Can you come up with a compelling reason why Go-Power should keep the technology rather than sell it to Toyota?
Step by Step Answer:
Foundations Of Finance
ISBN: 9781292318738
10th Global Edition
Authors: Arthur Keown, John Martin, J. Petty