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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
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 $200 million if the line is successful but only $60 million if it is unsuccessful. You believe that the probability of success is only about 40%. You learn whether the line is successful immediately after building the plant.
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| a-1. |
Calculate the expected NPV. (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place.) |
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| Â Â Expected NPV | $ million |
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| a-2. |
Would you build the plant? |
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| Suppose that the plant can be sold for $135 million to another automaker if the auto line is not successful. |
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| b-1. |
Calculate the expected NPV. (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 2 decimal places.) |
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| Â Â Expected NPV | $ million |
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| b-2. |
Would you build the plant? |
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