Cheng Inc. is considering a capital budgeting project that has an expected return of 24% and a standard deviation of 30%. What is the project's coefficient of variation? Do not round your intermediate calculations. Round the final answer to 2 decimal places.

The Coefficient of variation (CV) is a measure of the relative dispersion of a set of data, which is obtained by dividing the standard deviation of the set by its arithmetic mean and is usually expressed in percentage terms.

In this case the standard deviation is divided over the expected return, and we have to:

30/24 = 1.25

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ewomazinoade ewomazinoade · Answer 2 · 2022-03-03T11:47:05+01:00

ewomazinoade ewomazinoade

03-03-2022

The coefficient of variation is 1.25.

What is the coefficient of variation?

The coefficient of variation (CV) which is also known as the relative standard deviation measures the dispersion around the mean.

It is the ratio of the standard deviation to the mean. The higher the coefficient of variation, the greater the level of dispersion.

coefficient of variation = 30% / 24% = 1.25

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