Mountain Ski Corp. was set up to take large risks and is willing to take the gre

Question

Mountain Ski Corp. was set up to take large risks and is willing to take the greatest risk possible. Lakeways Train Co. is more typical of the average corporation and is risk-adverse.

a. Which of the following four projects should Mountain Ski Corp. choose? Compute the coefficients of variation to help you make your decision.

b. Which one of the four projects should Lakeway Train Co. choose based on the same criteria of using the coefficient of variation?

Year         Returns of Expected Value          Standard Deviation

A                  527,000                                       834,000

B                  682,000                                       306,000

C                  74,000                                          135,000

D                  140,000                                        89,000

Explanation / Answer

As Mountain ski is risk lover so it choose,

Lakeways is risk averse,

so it will choose

Exp VALue STD deviation CV 527,000 834,000 1.582543 682,000 306,000 0.44868 74,000 135,000 1.824324 140,000 89,000 0.635714

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