Klott Company used scenario analysis to evaluate a capital budgeting project. The analysis generated a net present value (NPV) equal to $10,500 and a standard deviation (σ) equal to $12,083. The project's coefficient of variation (CVNPV) is _____.
A)0.25
B)13.90
C)10.50
D)1.15
E)0.87

Question

Klott Company used scenario analysis to evaluate a capital budgeting project. The analysis generated a net present value (NPV) equal to $10,500 and a standard deviation (σ) equal to $12,083. The project's coefficient of variation (CVNPV) is _____. 
A)0.25
B)13.90
C)10.50
D)1.15
E)0.87

Quizplus · Accepted Answer

The coefficient of variation (CV) is calculated by dividing the standard deviation (σ) by the mean (μ). In this case, CVNPV = σ / NPV = $12,083 / $10,500 = 1.15.

Klott Company Used Scenario Analysis to Evaluate a Capital Budgeting