An auto plant that costs $200 million to build can produce a line of flexfuel cars that will produce cash flows with a present value of $260 million if the line is successful but only $120 million if it is unsuccessful. You believe that the probability of success is only about 45%. You learn whether the line is successful immediately after building the plant.

a-1. Calculate the expected NPV.

a-2. Would you build the plant?

Suppose that the plant can be sold for $170 million to another automaker if the auto line is not successful.

b-1. Calculate the expected NPV. b-2. Would you build the plant?