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Allison's Dresswear manufacturers is preparing a strategy for the fall season. One alternative is to enter a cashmere sweater market with a new line of
Allison's Dresswear manufacturers is preparing a strategy for the fall season. One alternative is to enter a cashmere sweater market with a new line of high-quality designer label products. The marketing department has determined that the cashmere sweater line offers the following probability of outcomes and related cash flows for the next year: Assume the following: (1) The initial cost to expand the wool sweater line is $50,000. (2) The cost of capital or discount rate is 5%. Questions: a.) What is the NPV of this investment? b.) Would you invest in this expansion? Select the most appropriate responses below for parts a.) and b.). (1) The initial cost to expand the wool sweater line is $50,000. (2) The cost of capital or discount rate is 5%. Questions: a.) What is the NPV of this investment? b.) Would you invest in this expansion? Select the most appropriate responses below for parts a.) and b.). a.) $1,639 a.) None listed b.) No, do not invest in the cashmere line. b.) Yes, invest in the cashmere line. a.) $1,639 a.) $1,537 a.) $1,537
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