Question
Kyle's Shoe Stores Inc. is considering opening an additional suburban outlet. An aftertax expected cash flow of $130 per week is anticipated from two stores
Kyle's Shoe Stores Inc. is considering opening an additional suburban outlet. An aftertax expected cash flow of $130 per week is anticipated from two stores that are being evaluated. Both stores have positive net present values.
Which store site would you select based on the distribution of these cash flows? Use the coefficient of variation as your measure of risk.
| Site A | Site B | ||
| Probability | Cash Flows | Probability | Cash Flows |
| .3 | 80 | .2 | 50 |
| .3 | 130 | .2 | 80 |
| .1 | 160 | .3 | 130 |
| .3 | 170 | .1 | 180 |
| .2 | 235 |
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
15th edition
77861612, 1259194078, 978-0077861612, 978-1259194078
