Palmer Corporation recently decided to invest in a local golf course. The company has considered several alternatives and has narrowed their decision to either Fairview or Hillsdale. The estimated cash flows for Fairview are as follows:
Fairview
Yearly After-tax Cash inflow (in thousands) . Probability
$70...................................................................... .2
75........................................................................ .2
90........................................................................ .2
105........................................................................ .2
110....................................................................... .2
Find the expected value of cash flows and the coefficient of variation for this course. Assume that Hillsdale has a coefficient of variation of .091. Based upon your answers, which of the following is true?
a. The coefficient of variation for Fairview is 0.123.
b. The expected value (of cash flows) for Fairview is $78 thousand.
c. Hillsdale is a less risky investment than Fairview.
d. The coefficient of variation for Fairview is 0.455.
e. Hillsdale is a more risky investment than Fairview.