1- Al Bundy is evaluating a new advertising program that could increase shoe sales. Possible outcomes and probabilities of the outcomes are shown next.

Possible Outcomes Additional

Sales in Units Probabilities Ineffective campaign800.20Normal response1400.40Extremely effective3200.40

Compute the coefficient of variation.

2- Debby's Dance Studios is considering the purchase of new sound equipment that will enhance the popularity of its aerobics dancing. The equipment will cost $22,000. Debby is not sure how many members the new equipment will attract, but she estimates that her increased annual cash flows for each of the next five years will have the following probability distribution. Debby's cost of capital is 13 percent. UseAppendix Dfor an approximate answer but calculate your final answers using the formula and financial calculator methods.

Cash FlowProbability$4,1200.35,0100.27,6900.210,5000.3

a.What is the expected value of the cash flow? The value you compute will apply to each of the five years.

b.What is the expected net present value?