Kyle’s Shoe Stores Inc. is considering opening an additional suburban outlet. An aftertax expected cash flow...

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Kyle’s Shoe Stores Inc. is considering opening an additionalsuburban outlet. An aftertax expected cash flow of $120 per week isanticipated from two stores that are being evaluated. Both storeshave positive net present values.

Site A Site B
Probability Cash Flows Probability Cash Flows
.2 60 .2 30
.2 120 .1 60
.3 130 .2 120
.3 150 .2 150
.3 180

a. Compute the coefficient of variation for eachsite. (Do not round intermediate calculations. Round youranswers to 3 decimal places.)



b. Which store site would you select based on thedistribution of these cash flows? Use the coefficient of variationas your measure of risk.

Site A
Site B

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3.5 Ratings (337 Votes)

Answer to Question bThe variable with the small Coefficient of See Answer

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Kyle’s Shoe Stores Inc. is considering opening an additionalsuburban outlet. An aftertax expected cash flow of $120 per week isanticipated from two stores that are being evaluated. Both storeshave positive net present values. Site ASite BProbabilityCash FlowsProbabilityCash Flows.260.230.2120.160.3130.2120.3150.2150.3180a. Compute the coefficient of variation for eachsite. (Do not round intermediate calculations. Round youranswers to 3 decimal places.) b. Which store site would you select based on thedistribution of these cash flows? Use the coefficient of variationas your measure of risk. Site ASite B

Site A				Site B
Probability		Cash Flows		Probability		Cash Flows
	.2		60		.2		30
	.2		120		.1		60
	.3		130		.2		120
	.3		150		.2		150
					.3		180