Suppose there are two projects experiencing the following cash flows: Project A...
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Accounting
Suppose there are two projects experiencing the following cash flows:
| Project A | Project B | |||
| Probability | Cash Flows | Probability | Cash Flows | |
| 0.2 | 6000 | 0.2 | 0 | |
| 0.6 | 6750 | 0.6 | 6750 | |
| 0.2 | 7500 | 0.2 | 18000 |
a) Calculate the Expected Annual Cash Flow for each project.
b) Given that Project A has a standard deviation of 474 and Project B has a standard deviation of 5797, find the coefficient of variation of each project.
c) Why might a firm pick Project A over B here?
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