Question: Mary Beth Clothes is considering opening an additional suburban outlet. An aftertax cash flow of $100 per day (expected value) is projected for each of

Mary Beth Clothes is considering opening an additional suburban outlet. An aftertax cash flow of $100 per day (expected value) is projected for each of the two locations being evaluated. Which of these sites would you select based on the distribution of these cash flows (use the coefficient of variation as your measure ofrisk):

Site B Site A Probability Cash flows Probability Cash flows $ 50 $ 20 .20 .10 .30 100 .20 50 .30 110 .40 100 150 .20 135

Site B Site A Probability Cash flows Probability Cash flows $ 50 $ 20 .20 .10 .30 100 .20 50 .30 110 .40 100 150 .20 135 .20 .10 180 $100 $100 Expected value Expected value

Step by Step Solution

3.40 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

Standard Deviations of Sites A and B Site A D D D D D D 2 P D D 2 P 50 100 50 2500 20 500 100 100 0 ... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Foundations Financial Management Questions!