Karamo's Shoe Stores Incorporated is considering opening an additional suburban outlet. An aftertax expected cash flow of $180 per week is anticipated from two stores that are being evaluated. Both stores have positive net present values. Probability 0.1 0.3 0.3 0.3 Site A Site A Site B Cash Flows $ 90 180 170 220 Probability 0.1 0.3 0.3 0.1 0.2 Coefficient of Variation Site B Cash Flows $ 50 70 180 a. Compute the coefficient of variation for each site. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. 230 290 b. Which store site would you select based on the distribution of these cash flows? Use the coefficient of variation as your measur risk. Activate Win
Karamo's Shoe Stores Incorporated is considering opening an additional suburban outlet. An aftertax expected cash flow of $180 per week is anticipated from two stores that are being evaluated. Both stores have positive net present values. Probability 0.1 0.3 0.3 0.3 Site A Site A Site B Cash Flows $ 90 180 170 220 Probability 0.1 0.3 0.3 0.1 0.2 Coefficient of Variation Site B Cash Flows $ 50 70 180 a. Compute the coefficient of variation for each site. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. 230 290 b. Which store site would you select based on the distribution of these cash flows? Use the coefficient of variation as your measur risk. Activate Win
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
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Transcribed Image Text:Karamo's Shoe Stores Incorporated is considering opening an additional suburban outlet. An aftertax expected cash flow of $180 per
week is anticipated from two stores that are being evaluated. Both stores have positive net present values.
Probability
0.1
0.3
0.3
0.3
Site A
Site A
Site B
Cash Flows
$ 90
180
170
220
Coefficient of
Variation
Probability
0.1
0.3
0.3
0.1
0.2
Site B
Cash Flows
$ 50
70
a. Compute the coefficient of variation for each site.
Note: Do not round intermediate calculations. Round your answers to 3 decimal places.
180
230
290
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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