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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, fourgoldbutton sports coat. The

Wardrobe Clothing Manufacturers is preparing a strategy for the fall season. One strategy is to go to a highly imaginative, new, fourgoldbutton sports coat. The allwool 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 fourgoldbutton and traditional blue blazer lines offer the following probabilities of outcomes and related cash flows:

New Coat Blue Blazer
Expected sales Probability Present value of cash flow from sales Probability Present value of cash flow from sales
Fantastic 0.5 $221,000 0.3 $341,000
Moderate 0.2 192,000 0.4 272,000
Dismal 0.3 88,600 0.3 0

The initial cost to get into the new coat line is $142,000 in designs, equipment, and inventory. To enter the blue blazer line, the initial cost in designs, inventory, and equipment is $102,000.

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

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

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