Wardrobe Clothing Manufacturers is preparing a strategy for the fall season

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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:

 

  

new coat present value blue blazer present value

 expected sale probability cash flow from sale probability of cash floe from sale

 

 Fantastic 0.4 $265,000 0.1 $396,000  

 Moderate 0.4 206,000 0.3 283,000  

 Dismal 0.2 90,500 0.6 0  

 

 

The initial cost to get into the new coat line is $147,000 in designs, equipment, and inventory. To enter the blue blazer line, the initial cost in designs, inventory, and equipment is $150,000.

 

 

 

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

  

 

  Net present value

 Enter New Coat Market ........................................ $ 

  

 Enter Blazer Market ..............................................$