# Coefficient of variation and risk

Metal manufacturing Inc. has isolated four alternatives for meeting its needs for increased production capacity. The attached table summarizes data gathered relative to each of these alternatives.

a) Calculate the coefficient of variation for each alternative.

b) If the firm wishes to minimize risk, which alternative do you recommend? Why?

See attachment.

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#### Solution Preview

a. Coefficient of variation(CV) = Standard Deviation/Expected Return

b. The CV measures the risk per unit of return ...

#### Solution Summary

The solution explains how to calculate the coefficient of variation and use it to select the alternative with lowest risk. See attachment for Excel file.

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