Farahs Fine Fashions (FFF) works in the quirky fashion world. FFF can produce 10,000 dresses...
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Farahs Fine Fashions (FFF) works in the quirky fashion world. FFF can produce 10,000 dresses for a cost of $18 each or 100,000 for a cost of $23 each. If the dress is a hit FFF can sell them for $100 each otherwise they will have to sell the dresses for $10. There is a 10% chance the dress will be a hit, but fortunately you will know this before you need to start sewing. What is the expected selling price? How many dresses should you make at the expected selling price? What is the value if you can wait to decide until next year? What is the value of this flexibility?
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