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 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...
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