Expected net present value of building the plant

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-Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $24,000 and will be depreciated straight-line over 7 years to a salvage value of zero. The grill will have no effect on revenues, but will save Johnny's $16,000 in energy expenses. The tax rate is 35 percent. What are the operating cash flows in years 1 to 7?

-An auto plant that costs $90 million to build can produce a new line of cars that will produce net cash flow of $30 million per year if the line is successful, but only $1.5 million per year if it is unsuccessful. You believe that the probability of success is about 10 percent. The auto plant is expected to have a life of 16 years and the opportunity cost of capital is 6 percent. What is the expected net present value of building the plant? Please state your answer in millions and in 2 decimal places.

Reference no: EM132696467

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