Problem $10-25$ Project Options $($LO$5)$

An auto plant that costs $$140$ million to build can produce a line of flex$-$fuel 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 will learn whether the line is successful immediately after building the plant.

a$-1.$ Calculate the expected NPV$.$

Note: 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.

a$-2.$ Would you build the plant?

Suppose that the plant can be sold for $$135$ million to another automaker if the auto line is not successful.

b$-1.$ Calculate the expected NPV$.$

Note: 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.

b$-2.$ Would you build the plant?