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A textile supplier sells fabric to furniture manufacturers. Develop a four-year financial model to compute the net present value (NPV) based on the following assumptions
A textile supplier sells fabric to furniture manufacturers. Develop a four-year financial model to compute the net present value (NPV) based on the following assumptions (most fabrics have market life cycles of four years, after which time they will need to be replaced by newer styles): (i) Selling price is $14.95/yard in year 1 and is expected to change each year (years 2, 3, and 4) between -2% and 3% (uniformly distributed). The percentage changes are independent of each other and are based on the price in the previous year. (ii) Number of yards of fabric sold is 350,000 in year 1 and will increase on average 15%. The percentage increase will be normally distributed with mean=15% and sd=5%. The increases are independent
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