Question: LMN Inc. is analyzing two expansion projects, Project L and Project M, with the following attributes: Project L: Cost of Capital - 10%, Initial Investment

LMN Inc. is analyzing two expansion projects, Project L and Project M, with the following attributes:

  • Project L: Cost of Capital - 10%, Initial Investment - $350,000, Cash Inflow Year 1 - $70,000, Cash Inflow Year 2 - $80,000, Cash Inflow Year 3 - $90,000
  • Project M: Cost of Capital - 11%, Initial Investment - $400,000, Cash Inflow Year 1 - $80,000, Cash Inflow Year 2 - $90,000, Cash Inflow Year 3 - $100,000 Perform a risk analysis for Project L and Project M using the coefficient of variation. Assess the relative riskiness of each project and provide recommendations.

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