Question: ZipUp ( Pty ) Ltd ( ZipUp ) is a clothing retailer with branches nationwide. ZipUp is not a registered VAT vendor. ZipUp is considering
ZipUp Pty Ltd ZipUp is a clothing retailer with branches nationwide. ZipUp is not a registered VAT vendor. ZipUp is considering rolling out a new clothing line and is evaluating two mutually exclusive clothing lines. Clothing line : Casual Joe Clothing line : Perfecto The Casual Joe clothing line and Perfecto clothing line will require an initial investment of R and R respectively. The following are the findings of market research performed by ZipUp: Casual Joe Perfecto Chance of occurrence Success of clothing line Success of clothing line Net cash profit generated per year from the clothing line Net cash profit generated per year from the clothing line Popular R Popular Chance of occurrence Average R R Average Failure R R Failure R The standard deviation of the Casual Joe clothing line is R and R for the Perfecto clothing line. ZipUp applies a discount rate of to investment options with a coefficient of variation and lower. Thereafter, is added to the discount rate for every increment. REQUIRED: Assist ZipUp Pty Ltd and calculate the expected net cash profit per year for the Casual Joe and Perfecto clothing lines respectively.
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