In: Finance
Problem 13-12 Coefficient of variation and investment decision [LO13-1]
Kyle’s Shoe Stores Inc. is considering opening an additional
suburban outlet. An aftertax expected cash flow of $120 per week is
anticipated from two stores that are being evaluated. Both stores
have positive net present values.
Site A | Site B | ||||||||||||||
Probability | Cash Flows | Probability | Cash Flows | ||||||||||||
0.2 | 70 | 0.1 | 40 | ||||||||||||
0.2 | 120 | 0.2 | 70 | ||||||||||||
0.4 | 130 | 0.2 | 120 | ||||||||||||
0.2 | 150 | 0.4 | 140 | ||||||||||||
0.1 | 220 | ||||||||||||||
a. Compute the coefficient of variation for each
site. (Do not round intermediate calculations. Round your
answers to 3 decimal places.)