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Auto.com is considering a plan to build a mechanic workshop with the cost and revenue projections shown below (in millions). One of his competitors, Mechanic.com
Auto.com is considering a plan to build a mechanic workshop with the cost and revenue projections shown below (in millions). One of his competitors, Mechanic.com is expected to do one of two things in Year 5:(1) build its own shop close to Auto.com's shop, which will put Auto.com shop out of business, or offer to buy Auto.com if it decides that this would be less expensive than building its own workshop. Auto thinks there is, a 358 probability that its program will be purchased for $6 million and a 65% probability that it won't be bought, and thus the shop will simply be closed down with no salvage value. Estimate net present value of the workshop (in thousands) at a wACC =10b, giving consideration to the potential future purchase
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