An auto plant that costs $220 million to build can produce a line of flexfuel cars that
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 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 theexpected 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? | ||
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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 2 decimal places.) |