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 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 ..............................................$