A firm is evaluating the relative riskiness of two capital budgeting projects. The following table summarizes the net present values and associated probabilities for various outcomes for the two projects.
$\text { Net Present Value }$

$\begin{array}{rrr}\text { Probability }&\text { Project A }&\text { Project B }\
\hline 0.25 & -\$ 5,000 & 0 \
0.50 & 4,000 & \$ 2,000 \
0.25 & 10,000 & 8,000
\end{array}$

-The coefficient of variations for projects A and B are
A) 0.6 and 1, respectively.
B) 0.8 and 2, respectively.
C) 1.2 and 1.5, respectively.
D) 1.6 and 1, respectively.

Question

A firm is evaluating the relative riskiness of two capital budgeting projects.  The following table summarizes the net present values and associated probabilities for various outcomes for the two projects.
$\text { Net Present Value }$

$\begin{array}{rrr}\text { Probability }&\text { Project A }&\text { Project B }\
\hline 0.25 & -\$ 5,000 & 0 \
0.50 & 4,000 & \$ 2,000 \
0.25 & 10,000 & 8,000
\end{array}$

-The coefficient of variations for projects A and B are
A) 0.6 and 1, respectively.
B) 0.8 and 2, respectively.
C) 1.2 and 1.5, respectively.
D) 1.6 and 1, respectively.

Quizplus · Accepted Answer

The Answer of A firm is evaluating the relative riskiness of two capital budgeting projects.  The following table summarizes the net present values and associated probabilities for various outcomes for the two projects.
$\text { Net Present Value }$

$\begin{array}{rrr}\text { Probability }&\text { Project A }&\text { Project B }\
\hline 0.25 & -\$ 5,000 & 0 \
0.50 & 4,000 & \$ 2,000 \
0.25 & 10,000 & 8,000
\end{array}$

-The coefficient of variations for projects A and B are
A) 0.6 and 1, respectively.
B) 0.8 and 2, respectively.
C) 1.2 and 1.5, respectively.
D) 1.6 and 1, respectively.

A Firm Is Evaluating the Relative Riskiness of Two Capital Net Present Value \text { Net Present Value } Net Present Value

A Firm Is Evaluating the Relative Riskiness of Two Capital $\text { Net Present Value }$