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An auto plant that costs $55 million to build can produce a new line of cars that will produce net cash flow of $40 million
An auto plant that costs $55 million to build can produce a new line of cars that will produce net cash flow of $40 million per year If the line is successful, but only $7 million per year if it is unsuccessful. You believe that the probability of success is about 10 percent. The auto plant is expected to have a life of 10 years and the opportunity cost of capital is 13 percent
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