Question
George Taylor, owner of a toy manufacturing company, is considering the addition of a new product line. Marketing research shows that gorilla action figures
George Taylor, owner of a toy manufacturing company, is considering the addition of a new product line. Marketing research shows that gorilla action figures will be the next fad for the six- to ten-year-old age group. This new product line of gorilla-like action figures and their high-tech vehicles will be called Go-Rilla. George estimates that the most likely yearly incremental cash flow will be $26,000. There is some uncertainty about this value because George's company has never before made a product similar to the Go-Rilla. He has estimated the potential cash flows for the new product line along with their associated probabilities of occurrence, as follows: University Probability Exi Cash Flows of Occurrence $ 20,000 1% $ 22,000 12% $ 24,000 23% $ 26,000 28% $ 28,000 23% $ 30,000 12% $ 32,000 1% a. Calculate the standard deviation o estimated cash flows. b. Calculate the coefficient of variati If George's other product lines hav average coefficient of variation of can you say about the risk of the C Project relative to the average risk other product lines?
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