Determine and Calculate the expected NPV

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An auto plant that costs $160 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 $70 million if it is unsuccessful. You believe that the probability of success is only about 40%. You will learn whether the line is successful immediately after building the plant.

Question 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.)

Question a-2. Would you build the plant?

Suppose that the plant can be sold for $110 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.)

Question b-1. Calculate the expected NPV.

Question b-2. Would you build the plant?

Reference no: EM132484355

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