Coefficient of variation evaluating risk of capital budget, Financial Management

Assignment Help:

Why is the coefficient of variation a better risk calculates to use than the standard deviation while evaluating the risk of capital budgeting projects?

The coefficient of variation is a better risk measure as compared to the standard deviation alone as the CV adjusts for the size of the project.  The CV calculates the standard deviation divided by the mean and hence puts the standard deviation into context.  For instance, a standard deviation of .05 may be referred as large relative to a mean of .02 but would be referred a small value relative to a mean value of 8.


Related Discussions:- Coefficient of variation evaluating risk of capital budget

Show repayment of principal, Your company is preparing to borrow $1,750,000...

Your company is preparing to borrow $1,750,000 on a 3-year, 10%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will sho

Explain investment opportunity schedule, What is the investment opportunity...

What is the investment opportunity schedule (IOS)?  How does it help financial managers make business decisions? The investment opportunity schedule depicts graphically propose

Types of us treasury securities, Under treasuries, there exist ...

Under treasuries, there exist different types of securities like treasury bills, treasury notes, treasury bonds, inflation protection securities

Calculate debt or equity ratio, Calculate Debt or Equity Ratio XYZ LI...

Calculate Debt or Equity Ratio XYZ LIMITED Key data related to XYZ for last three years is as follows:   2011/12 2010/12

What is rationale and behind profitability maximisation, What is Rationale ...

What is Rationale and behind profitability maximisation Rationale & behind profitability maximisation, as a guide to financial decision making, is simple. Profit is a test of e

Yield on treasury bills, Treasury Bills, popularly known as T-bills, ...

Treasury Bills, popularly known as T-bills, are issued in India by the RBI on behalf of the Government of India. T-bills are short-term securities with a maturity of 91

., give and explain the seven sources of finance

give and explain the seven sources of finance

Determine firm sales revenue, a) Gross profit shows the difference between ...

a) Gross profit shows the difference between a firm's sales revenues and its direct cost of sales (COGS). Net profit, however, is calculated after deducting overheads (expenses) fr

What is profit maximisation criterion, Profit maximisation criterion P...

Profit maximisation criterion Profit maximisation criterion is unsuitable and inappropriate as an operational objective of financing, investment and dividend decisions of a fi

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd