An auto plant that costs $140 million to build can produce a line of flexfuel cars that will produce cash flows with a present value of $200 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.

a-1.

Calculate the expected NPV. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place.)

Expected NPV $ million

a-2.

Would you build the plant?

Yes No

Suppose that the plant can be sold for $135 million to another automaker if the auto line is not successful.

b-1.

Calculate the expected NPV. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 2 decimal places.)

Expected NPV $ million

b-2.

Would you build the plant?

Yes No