Standard deviation versus coefficient of variation as measures of risk A1 Furniture Makers, a firm specializing in customized contemporary furniture, is considering several expansion projects. All the alternatives promise to produce an acceptable return. Data on four possible projects follow.

a. Which project is least risky, based on the range of possible outcomes?

b. Which project has the lowest standard deviation? Explain why standard deviation may not be an entirely appropriate measure of risk for this comparison.

c. Calculate the coefficient of variation for each project. Which project do you think A1 Furniture Makers should choose? Explain why.

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Project Faro Guia Lagos Sagres Expected return 15% 17 19 18 Range Standard deviation 4% 5 6 6 3% 5 4 5.