Question
An auto plant that costs $220 million to build can produce a line of flexfuel cars that will produce cash flows with a present value
An auto plant that costs $220 million to build can produce a line of flexfuel cars that will produce cash flows with a present value of $280 million if the line is successful but only $150 million if it is unsuccessful. You believe that the probability of success is only about 52%. 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.) a-2. Would you build the plant? Yes No Suppose that the plant can be sold for $190 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 1 decimal place.) b-2. Would you build the plant? Yes No
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started