Coefficient of variation Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The data gathered relative to each of these alternatives is summarized in the following table.
|
Alternative
|
Expected Return
|
Standard Deviation of Return
|
|
A
|
20%
|
7.0%
|
|
B
|
22%
|
9.5%
|
|
C
|
19%
|
6.0%
|
|
D
|
16%
|
5.5%
|
a. Calculate the coefficient of variationfor each alternative.
b. If the firm wishes to minimize risk, which alternative do you recommend? Why