Compute the expected value of projects

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Reference no: EM1373130

A company is planning two business projects. Project A will return a loss of $45 if conditions are poor; a profit of $35 if conditions are good; and a profit of $155 if conditions are excellent. Project B will return a loss of $100 if conditions are poor, a profit of $60 if conditions are good, and a profit of $300 if conditions are excellent. The probability distribution of conditions follows:

Conditions : Poor Good Excellent
Probabilities: 40% 50% 10%

(i) Compute the expected value of each project and identify the preferred project according to this criterion.
(ii) Compute the standard deviation of each project and identify the project that has the higher level of risk.
(iii) Compute the coefficient of variation for each project and identify the preferred project according to this criterion.

Reference no: EM1373130

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