Question: I Need help with question at the bottom. Thnx :) An auto plant that costs $90 million to build can produce a new line of
I Need help with question at the bottom. Thnx :)
An auto plant that costs $90 million to build can produce a new line of cars that will produce net cash flow of $45 million per year if the line is successful, but only $2.5 million per year if it is unsuccessful. You believe that the probability of success is about 70 percent. The auto plant is expected to have a life of 13 years and the opportunity cost of capital is 11 percent. What is the expected net present value of building the plant? Please state your answer in millions and in 2 decimal places. 127.68 Correct response: 127.68+0.02million If the plant could be sold for $100 million to another automaker in one year if the auto line is not successful, what is the expected net present value of building the plant? Please state your answer in millions and in 2 decimal places. Number million
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