Shack Homebuilders Limited is evaluating a new promotional campaign that could i

Question

Shack Homebuilders Limited is evaluating a new promotional campaign that could increase home sales. Possible outcomes and probabilities of the outcomes are shown next.

possible Outcomes                          Additional Sales in Units                 Probabilities

Ineffective Campaign 20 40

Normal Response                               80 20

Extremely Effective                           90 40

Compute the coefficient of variation. (Do not round intermediate calculations. Round your answer to 3 decimal places.)
  

Explanation / Answer

Expected sales=Respective sale*Respective probability

=(20*0.4)+(80*0.2)+(90*0.4)=60 units

Standard deviation=[Total probability*(Sales-Expected value)^2/Total PRobability]^(1/2)

=32.86 (Approx).

Hence coefficient of variation=Standard deviation/Expected value

=(32.86/60)

=0.548(Approx).

probability Sales probability*(Sales-Expected value)^2 0.4 20 0.4*(20-60)^2=640 0.2 80 0.2*(80-60)^2=80 0.4 90 0.4*(90-60)^2=360 Total=1080

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