The most basic responsibility that comes with borrowing money from a bank
1 answer:
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Answer:
a. 42.5%, 34.4%, 34.21%, 30.63%
b. Option D
The question in proper order
Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each of these alternatives,
The table is inserted below
(Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)
a. Calculate the coefficient of variation for each alternative.
A?
B?
C?
D?
b. If the firm wishes to minimize risk, which alternative do you recommend? Why?
Explanation:
Coefficient of Variation = Standard Deviation/Expected Return * 100%
Standard
Expected deviation Coefficient of
Alternative return of return variation
A 20% 8.5% 42.5%
B 25% 8.6% 34.4%
C 19% 6.6% 34.21%
D 16% 4.9% 30.63%
(b)
Coefficient of Variation, CV, denotes the risk per unit of return. This implies that a low CV means a low risk per unit of return. Hence, the firm can minimize risk by opting for option D which gives the lowest CV and therefore offers the lowest risk
