Mountain Ski Corp. was set up to take large risks and is willing to take the gre
ID: 2647283 • Letter: M
Question
Mountain Ski Corp. was set up to take large risks and is willing to take the greatest risk possible. Lakeways Train Co. is more typical of the average corporation and is risk-adverse.
a. Which of the following four projects should Mountain Ski Corp. choose? Compute the coefficients of variation to help you make your decision.
b. Which one of the four projects should Lakeway Train Co. choose based on the same criteria of using the coefficient of variation?
Year Returns of Expected Value Standard Deviation
A 527,000 834,000
B 682,000 306,000
C 74,000 135,000
D 140,000 89,000
Explanation / Answer
Working
Answer
a. Which of the following four projects should Mountain Ski Corp. choose? Compute the coefficients of variation to help you make your decision.
Mountain Ski Corp. choose Project C
Note : Project C has greatest risk as its coefficient of variation is higher among all
b. Which one of the four projects should Lakeway Train Co. choose based on the same criteria of using the coefficient of variation?
Lakeway Train Co. choose Project B
Note : Project B has Lowest risk as its coefficient of variation is Lower among all
Year Returns of Expected Value Standard Deviation Coeffecient of Variation [a] [b] [c= b/a *100 ] A 527,000.00 834000 1.58 B 682,000.00 306000 0.45 C 74,000.00 135,000 1.82 D 140,000.00 89,000 0.64Related Questions
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