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An auto plant that costs $110 million to build can produce a line of flex-fuel cars that will produce cash flows with a present value
An auto plant that costs $110 million to build can produce a line of flex-fuel cars that will produce cash flows with a present value of $150 million if the line is successful but only $60 million if it is unsuccessful. You believe that the probability of success is only about 40%. You will learn whether the line is successful immediately after building the plant.
Note: Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answers in millions rounded to 1 decimal place. a-2. Would you build the plant? Suppose that the plant can be sold for $105 million to another automaker if the auto line is not successful. b-1. Calculate the expected NPV. Note: Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answers in millions rounded to 1 decimal place. b-2. Would you build the plantStep by Step Solution
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