Reference no: EM132484182

Point 1: Wardrobe Clothing Manufacturers is preparing a strategy for the fall season. One strategy is to go to a highly imaginative, new, four-gold-button sports coat. The all-wool product would be available for males and females. A second option would be to produce a traditional blue blazer line. The marketing research department has determined that the four-gold-button and traditional blue blazer lines offer the following probabilities of outcomes and related cash flows:

Expected sales    Probability new coat present value cash flow from sales probability Blue coat present value cash from fantastic            0.2                     $250,000                                                                  0.2    390,000

moserate 0.4      $ 175,000                                                                     0.4 316,000

decimal 0.4 $94,200                                                                                   0.4 0

• The initial cost to get into the new coat line is $152,000 in designs, equipment, and inventory. To enter the blue blazer line, the initial cost in designs, inventory, and equipment is $166,000.

Question a. Calculate Net present value. (Negative answers should be indicated by a minus sign.)

• Net
• present value
• Enter New Coat Market $
• Enter Blazer Market $