An auto plant that costs $140 million to build can produce a line of flexfuel cars that will produce cash flows with a present value of $180 million
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An auto plant that costs $140 million to build can produce a line of flexfuel cars that will produce cash flows

with a present value of $180 million if the line is successful but only $80 million if it is unsuccessful. You believe that the probability of success is only about 30%. 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.)

 

Suppose that the plant can be sold for $140 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 1 decimal place.)

Top Answer

Npv=Pv of Cash... View the full answer

IMG_20190603_015935394_compress81.jpg

Cash Outflow
= $ 140 million
Cash Inflow
If succaful = $180 million
I. unsuccessful = $80 million
Probability
Success
=301
UnSUCCUS = 1001. - 301. = 701.
MPV of Cash Inflow
Case
Cash Inflow ( 2 )...

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