QUESTION THREE [16] Simonsig Limited is attempting to make a choice between two projects based on the measure of the riskiness. The projects have the following expected cash flows in the next 5 years: Year Project A 1 R900 000 2 R800 000 3 R400 000 4 R300 000 5 R200 000 Project R900 000 R500 000 R400 ODO R300 000 R100 000 Required: 3.1 Estabilish, using the standard deviation of cash tows as a measure of risk, which project is riskler. (5) Page 5 of 8 3.2 3.3 3.4 Estabilish, using the co-efficient of variation of cash flow as a measure of risk, which project is riskler (5) Explain what measure of risk you would prefer. The primary difference between the standard deviation and the co-efficient of vartation as measures is: a) The coercent of variation is easy to calculate b) The standard deviation is a measure of relative nisk whereas coefficient of variation is a measure of absolute risk. C The coeficient of variation is a measure of relative risk whereas the standard deviation is the measure absolute risk a) The standard deviation is rarely used in practice whereas the coefficient of variation is widely used