Kyle’s Shoe Stores Inc. is considering opening an additional
suburban outlet. An aftertax expected cash flow of $120 per week is
anticipated from two stores that are being evaluated. Both stores
have positive net present values.
Site A | Site B | ||||||||||||||
Probability | Cash Flows | Probability | Cash Flows | ||||||||||||
.2 | 70 | .1 | 40 | ||||||||||||
.2 | 120 | .2 | 70 | ||||||||||||
.4 | 130 | .2 | 120 | ||||||||||||
.2 | 150 | .4 | 140 | ||||||||||||
.1 | 220 | ||||||||||||||
a. Compute the coefficient of variation for each
site. (Do not round intermediate calculations. Round your
answers to 3 decimal places.)
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.
Site A | |
Site B |
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Kyle’s Shoe Stores Inc. is considering opening an additional suburban outlet. An aftertax expected cash flow...
Kyle’s Shoe Stores Inc. is considering opening an additional suburban outlet. An aftertax expected cash flow of $130 per week is anticipated from two stores that are being evaluated. Both stores have positive net present values. Site A Site B Probability Cash Flows Probability Cash Flows .3 80 .2 50 .3 130 .2 80 .1 160 .3 130 .3 170 .1 180 .2 235 a. Compute the coefficient of variation for each site. (Do not round intermediate calculations. Round...
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