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cash flows

/in /by

Question

An auto plant that costs $200 million to build can produce a line of flexfuel cars that will produce cash flows

with a present value of $270 million if the line is successful but only $120 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 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 1 decimal place.)
  Expected NPV$  million  
a-2.Would you build the plant?
    
 YesNo
Suppose that the plant can be sold for $160 million to another automaker if the auto line is not successful.
b-1.Calculate the expected NPV. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 2 decimal places.)
  Expected NPV$  million  
b-2.Would you build the plant?
  
 YesNo
 
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