In the previous problem you found the benefit from delaying an investment decision. Now use the same data to calculate the effect of waiting on the project's risk. By how much will delaying reduce the project's coefficient of variation? (Hint: Use the expected NPV as found in Problem 14.)
A) 2.23
B) 2.46
C) 2.70
D) 2.97
E) 3.27

Question

Quizplus · Accepted Answer

The coefficient of variation is a measure of risk that is calculated by dividing the standard deviation of a project's NPV by its expected NPV. By delaying the investment decision, the standard deviation of the project's NPV will decrease, while the expected NPV will increase. This will result in a decrease in the project's coefficient of variation.

In the Previous Problem You Found the Benefit from Delaying