Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each of these alternatives, Alternative Expected return Standard deviation A 21% 7.9% B 24% 9.7% C 17% 6.2% D 13% 3.2% a. Calculate the coefficient of variation for each alternative. b. If the firm wishes to minimize risk, which alternative do you recommend? Why?
Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each of these alternatives, Alternative Expected return Standard deviation A 21% 7.9% B 24% 9.7% C 17% 6.2% D 13% 3.2% a. Calculate the coefficient of variation for each alternative. b. If the firm wishes to minimize risk, which alternative do you recommend? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each of these alternatives,
Alternative
|
Expected
return
|
Standard deviation
|
A
|
21%
|
7.9%
|
B
|
24%
|
9.7%
|
C
|
17%
|
6.2%
|
D
|
13%
|
3.2%
|
a. Calculate the coefficient of variation for each alternative.
b. If the firm wishes to minimize risk, which alternative do you recommend? Why?
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