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 .20 .10 180 $100 $100 Expected value Expected value
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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
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