Greengage, Inc., a successful nursery, is considering several expansion projects

Question

Greengage, Inc., a successful nursery, is considering several expansion projects.  All of the alternatives promise to produce an acceptable return.  Data on four possible projects follow:

A. Which project is least risky, judging on the basis of range?

B. Which project is least risky, judging on the basis of standard deviation?

C. Explain why standard deviation may not be an entirely appropriate measure of risk for pusrposes of this comparison.

D. Calculate the coefficient of variation for each project. (THREE DECIMAL PLACES)

E. Which project do you think Greengage's owners should choose?

Project expected return range standard deviation A 13.4% 4.1% 3.5% B 11.7 4.6 3.2 C 11.8 4.2 2.9 D 11.9 5.2 2.7

Explanation / Answer

So,the project A is least risky.

In the given case the return and risk both are different.so, we cannot compare it directly.

              

Project A = 3.5/13.4 = 0.2612

Project B = 3.2/11.7 = 0.2735

Project C = 2.9/11.8 = 0.2458

Project D = 2.7/11.9 = 0.2269

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