Question

In: Finance

Problem 13-5 Coefficient of variation [LO13-1] Al Bundy is evaluating a new advertising program that could...

Problem 13-5 Coefficient of variation [LO13-1]

Al Bundy is evaluating a new advertising program that could increase shoe sales. Possible outcomes and probabilities of the outcomes are shown next.

Possible Outcomes Additional
Sales in Units		 Probabilities
Ineffective campaign 50 0.20
Normal response 115 0.40
Extremely effective 360 0.40


Compute the coefficient of variation. (Do not round intermediate calculations. Round your answer to 3 decimal places.)


Solutions

Expert Solution

Expected sales=Respective sales*Respective probability

=(0.2*50)+(0.4*115)+(0.4*360)

=200

probability Sales probability*(Sales-Expected Sales)^2
0.2 50 0.2*(50-200)^2=4500
0.4 115 0.4*(115-200)^2=2890
0.4 360 0.4*(360-200)^2=10240
Total=17630

Standard deviation=[Total probability*(Sales-Expected Sales)^2/Total probability]^(1/2)

=(17630)^(1/2)

=132.778(Approx)

Coefficient of variation=Standard deviation/Expected sales

=132.778/200

=0.664(Approx)

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Problem 13-4 Coefficient of variation [LO13-1] Shack Homebuilders Limited is evaluating a new promotional campaign that...
Problem 13-4 Coefficient of variation [LO13-1] Shack Homebuilders Limited is evaluating a new promotional campaign that could increase home sales. Possible outcomes and probabilities of the outcomes are shown next.      Possible Outcomes Additional Sales in Units Probabilities Ineffective campaign 20 0.40 Normal response 110 0.40 Extremely effective 140 0.20 Compute the coefficient of variation. (Do not round intermediate calculations. Round your answer to 3 decimal places.)
Problem 13-18 Coefficient of variation and investment decision [LO13-1] Mr. Sam Golff desires to invest a...
Problem 13-18 Coefficient of variation and investment decision [LO13-1] Mr. Sam Golff desires to invest a portion of his assets in rental property. He has narrowed his choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mr. Golff has developed the following estimates of the cash flows for these properties. Palmer Heights Yearly Aftertax Cash Inflow (in thousands) Probability $ 60 .2 65 .2 80 .2 95 .2 100 .2 Crenshaw Village...
Problem 13-12 Coefficient of variation and investment decision [LO13-1] Kyle’s Shoe Stores Inc. is considering opening...
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...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero salvage...
Problem 13-23 (REV) Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for...
Problem 13-23 (REV) Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero salvage...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 24% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero salvage...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 18% each of the last three years. He has computed the cost and revenue estimates for each product as follows:    Product A Product B   Initial investment:   Cost of equipment (zero...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero salvage...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage...
Problem 13-23 Comprehensive Problem [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6] Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero salvage...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT