Problem:
Swift Manufacturing must choose between two asset purchases. The annual rate of return and the related probabilities given in the table.
Project 257 Project 432
Rate of return Probability Rate of return Probability
-10% 0.01 10% 0.05
10 0.04 15 0.10
20 0.05 20 0.10
30 0.10 25 0.15
40 0.15 30 0.20
45 0.30 35 0.15
50 0.15 40 0.10
60 0.10 45 0.10
70 0.05 50 0.05
80 0.04
100 0.01
a. For each project, compute
1. the range of possible rates of return
2. the expected value of return
3. the standard deviation of the returns
4. the coefficient of variation of the returns
b. Construct the bar chart of each distribution of rates of return
c. Which project would you consider less risky? why?