A retail company is considering opening a new store in a shopping mall. The company expects that
Question:
A retail company is considering opening a new store in a shopping mall. The company expects that the new store will generate revenues of $2.5 million per year, but there is a risk that the actual revenue may be lower than expected. The company estimates that the probability of generating $2.5 million in revenue is 60%, while the probability of generating $2.0 million in revenue is 30%, and the probability of generating $1.5 million in revenue is 10%. The fixed costs associated with opening and operating the new store are expected to be $1.5 million per year. The company's required rate of return is 15%. Calculate the expected value, standard deviation, and coefficient of variation for this investment. Based on these calculations, should the company open the new store?