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Calculate net present value.

Calculate net present value.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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 Fantastic 0.4 Moderate 0.2 Dismal 0.4 New Coat Present Value of Cash Flows from Sales $240,000 180,000 0 Enter New Coat Market Enter Blazer Market Blue Blazer Probability 0.2 0.6 0.2 The initial cost to get into the new coat line is $100,000 in designs, equipment, and inventory. To enter the blue blazer line, the initial cost in designs, inventory, and equipment is $60,000 a. Calculate net present value. Net present value. $ Present Value of Cash Flows from Sales $120,000 75,000 55,000
Transcribed Image Text: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 Fantastic 0.4 Moderate 0.2 Dismal 0.4 New Coat Present Value of Cash Flows from Sales $240,000 180,000 0 Enter New Coat Market Enter Blazer Market Blue Blazer Probability 0.2 0.6 0.2 The initial cost to get into the new coat line is $100,000 in designs, equipment, and inventory. To enter the blue blazer line, the initial cost in designs, inventory, and equipment is $60,000 a. Calculate net present value. Net present value. $ Present Value of Cash Flows from Sales $120,000 75,000 55,000
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