The Flotsam and Jetsam Wreckage Company will invest in two of three possible proposals, the cash flows of which are normally distributed. The expected net present value (discounted at the risk-free rate) and the standard deviation for each proposal are given as follows:

Assuming the following correlation coefficients for each possible two-project combination, which combination dominates the others?

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PROPOSAL Expected net present value Standard deviation $10,000 4,000 $8,000 3,000 6,000 4,000 PROPOSAL COMBINATIONS 1 with 2 1 with 3 2 with 3 CORRELATION COEFFICIENTS 0.60 0.40 0.50