An auto plant that costs $170 million to build can produce a line of flexfuel cars that will produce cash flows with a present value of $240 million if the line is successful but only $80 million if it is unsuccessful. You believe that the probability of success is only about 50%. 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 answers in millions rounded to 1 decimal place.) a-2. Would you build the plant? Suppose that the plant can be sold for $140 million to another automaker if the auto line is not successful. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answers in millions rounded to 1 decimal place.) b-1. Calculate the expected NPV. b-2. Would you build the plant?
An auto plant that costs $170 million to build can produce a line of flexfuel cars that will produce cash flows with a present value of $240 million if the line is successful but only $80 million if it is unsuccessful. You believe that the probability of success is only about 50%. You will learn whether the line is successful immediately after building the plant.
a-1. Calculate the expected
a-2. Would you build the plant?
Suppose that the plant can be sold for $140 million to another automaker if the auto line is not successful. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answers in millions rounded to 1 decimal place.)
b-1. Calculate the expected NPV.
b-2. Would you build the plant?
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 4 images
