Response to the following problem:
Consider the probability distributions of the first year cash flows of two projects, GHI and JKL:
|
GHI
Possible Cash Flow
|
JKL
Probability
|
|
-$5,000
|
30%
|
|
$O
|
30%
|
|
+$7,000
|
40%
|
a. Calculate the range of possible cash flows for each project.
b. Calculate the expected cash flow for each project.
c. Calculate the standard deviation of the possible cash flows for each project.
d. Calculate the coefficient of variation of the possible cash flows for each project.
e. Which project has more risk? Why?