Karamo's Shoe Stores Incorporated is considering opening an additional suburban outlet. An aftertax expected cash flow of $100 perweek is anticipated from two stores that are being evaluated. Both stores have positive net present values.Probability0.20.20.20.4Site ASite BSite ACash FlowsO Site AO Site B$50100110120Coefficient ofVariationProbability0.10.20.20.20.3a. Compute the coefficient of variation for each site.Note: Do not round intermediate calculations. Round your answers to 3 decimal places.Site BCash Flows$2050100150190b. Which store site would you select based on the distribution of these cash flows? Use the coefficient of variation as your measure ofrisk.

Coefficient of Variation= Standard deviation / aftertax expected cash flow Standard deviation=…

Karamo's Shoe Stores Incorporated is considering opening an additional suburban outlet. An aftertax expected cash flow of $100 per week is anticipated from two stores that are being evaluated. Both stores have positive net present values. MENGAN MENGANTAREATION AU Site A Probability 0.2 0.2 0.2 0.4 Cash Flows Site A Site B Coefficient of Variation RE Probability 0.1 $ 50 100 110 120 0.2 0.2 0.2 0.3 a. Compute the coefficient of variation for each site. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Site B Cash Flows $20 50 100 150 190

Karamo's Shoe Stores Incorporated is considering opening an additional suburban outlet. An aftertax expected cash flow of $100 per week is anticipated from two stores that are being evaluated. Both stores have positive net present values. MENGAN MENGANTAREATION AU Site A Probability 0.2 0.2 0.2 0.4 Cash Flows Site A Site B Coefficient of Variation RE Probability 0.1 $ 50 100 110 120 0.2 0.2 0.2 0.3 a. Compute the coefficient of variation for each site. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Site B Cash Flows $20 50 100 150 190

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Harry is trying to evaluate a two year project using NPV. There is uncertainty as to the level of sales (in units) in each of the two years: Year 1 Sales units Probability Year 2 Sales units Probability 10,000 0.3 8,000 0.2 10,000 0.8 15,000 0.7 20,000 0.6 10,000 0.4 Required: (a) On what expected level of sales in Year 1 and 2 should Harry base his NPV calculation? (b) Imagine that the project outlay is £230,000 and each unit sold has a contribution of £10. If Harry’s cost of capital is 10%, what is the project’s…
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Karamo's Shoe Stores Incorporated is considering opening an additional suburban outlet. An aftertax expected cash flow of $160 per week is anticipated from two stores that are being evaluated. Both stores have positive net present values. Probability 0.2 0.2 0.3 0.3 Site A Site B Site A Cash Site A O Site B FlowS $ 70 160 170 210 Probability 0.1 0.2 0.2 0.4 0.1 a. Compute the coefficient of variation for each site. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Site B Coefficient of Variation Cash FlowS $ 50 80 160 210 230 b. Which store site would you select based on the distribution of these cash flows? Use the coefficient of variation as your measure of risk.
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