Reliable Industries is consideringthe construction of a power plant investment in India.Reliable's analysts calculate that the cost of building the plant is $600 million,and the IRR of the plant is 13%.The ana-lysts also estimate that,given the experience of building the first plant,a second plant canbe built for $550 million and additional plants can be built for about $500 million each.
a. How would you go about evaluating whether or not to build this power plant inIndia?
b. Are you evaluating a project or a strategy?
c. How does the risk associated with the power plant strategy compare with the riskassociated with the individual power plants?