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Determine which project will be risk taker

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Reference no: EM132545376

State         A.             B               probability

Optimist     900000    600000       0.2

Moderate     600000    600000      0.6

Pessimistic   300000    600000      0.2

Question 1: Determine which project will be chosen by:

a) risk taker

b) risk averter

The two projects have the same expected cash flows. Project A is riskier since there's a chance that the cash flow will be 300,000. Project B is less risky since we are sure that 600,000 will be received.

Question 2: Calculate risk :

a) standard deviation

b) coefficient of variation

Reference no: EM132545376

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