Question
An auto plant that costs $150 million to build can produce a line of flexfuel cars that will produce cash flows with a present value
An auto plant that costs $150 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 $80 million if it is unsuccessful. You believe that the probability of success is only about 50%. You will learn whether the line is successful immediately after building the plant.
calculate theexpected NPV.
a-2.Would you build the plant?
Suppose that the plant can be sold for $140 million to another automaker if the auto line is not successful.
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.)
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