Question

Kyle’s Shoe Stores Inc. is considering opening an additional suburban outlet with the following data:

Probability      NPV

.3                     80

.3                     130

.1                     160

.3                     170

What is the coefficient of variation for the new outlet? Round intermediate calculations and the answer to the hundredth place. ___

If a second possible outlet has a coefficient of variation of .50, would you prefer this second outlet over the first outlet considered? Enter yes or no.__

Answer 1

Probablity (P)	NPV	P * NPV	Dx =(NPV - Mean)	P * (Dx)^2
0.3	80	24	-50	750
0.3	130	39	0	0
0.1	160	16	30	90
0.3	170	51	40	480
Mean =	130		1320

Standard Deviation = Square root of 1320 = 36.331804

Co-efficient of variation (CV) = Standard deviation/Mean

=36.331804/130

= 0.2795 Approx

If a second possible outlet has a coefficient of variation of .50 then we will nbot prefer the second possible outlet

And well will go for the first one as the lower CV is better than higher CV

For any clarification comment.

Please thumps up, Thank you