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Pepe Jeans- Case Study

Acting as an outside consultant, what would you recommend that Pepe do? Given the data in the case, perform a financial analysis to evaluate the alternatives that you have identified. (Assume that the new inventory could be valued at six weeks’ worth of the yearly cost of sales. Use a 30 percent inventory carrying cost rate. ) Calculate a payback period for each alternative. Pepe Jeans has 3 options: Do nothing Decrease lead time to 6 weeks Build a factory and decrease lead time to 3 months Our calculations on the attached pages. We would recommend that Pepe choose Alternative 2, given the increase in the yearly profits. Although alternative two has an initial investment of 1. 3 million and…