Question
A company is considering a project that has the following possible outcomes and probabilities: 30% chance of earning a profit of $100,000 50% chance of
A company is considering a project that has the following possible outcomes and probabilities:
- 30% chance of earning a profit of $100,000
- 50% chance of breaking even
- 20% chance of incurring a loss of $80,000
a) Calculate the expected value of this project.
b) Determine the standard deviation of this project.
c) Calculate the coefficient of variation (CV) for this project.
d) Based on the CV, what is your recommendation for the company?
Assume that the company has a cost of capital of 10%.
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Data Analysis And Decision Making
Authors: Christian Albright, Wayne Winston, Christopher Zappe
4th Edition
538476125, 978-0538476126
