A Firm Is Considering Two Projects,A and B,with the Following

question 52

Multiple Choice

A firm is considering two projects,A and B,with the following probability distributions for profit. $$\begin{array} { c c c } \begin{array} { c } \text { Prafit } \\\text { (\$1,000s) }\end{array} & \begin{array} { c } \text { Praject } A \\\text { Prabability } ( \% ) \end{array} & \begin{array} { c } \text { Project } B \\\text { Prabability } ( \% ) \end{array} \\\hline \$ 20 & 10 & 10 \\40 & 15 & 15 \\60 & 50 & 25 \\80 & 15 & 40 \\100 & 10 & 10\end{array}$$ Given the above,a decision maker using the coefficient of variation rule would

• A)choose project A.
• B)choose project A only if risk averse.
• C)choose project B.
• D)choose project B only if risk loving.
• E)not be able to make a decision using that rule.

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Definitions:

Consolidated Net Income

The total net income of a parent company and its subsidiaries after adjusting for inter-company transactions and minority interests, presented in consolidated financial statements.

Dividends

Money given by a business to its owners, often sourced from the firm's profits.

Financing Activities

Cash flow activities related to raising capital and repaying shareholders, including issuing debt, selling equity, dividends, and repaying debt.