Co-efficient of variation method For Risk And Uncertainty In Capital Budgeting:
Co-efficient of variation is a relative measure of dispersion. It the projects here the same cost but different net present values, relatives measure, i.e., Co-efficient of variation should be risk induced. It can be calculated as:
Co-efficient of variation = Standard deviation/mean × 100
If the co-efficient of variation of project ‘X’ in more then that ‘Y’ project X in more risk. Hence, project Y should be selected.
[Post Image Courtesy of Yodiyim at FreeDigitalPhotos.net]
Co-efficient of variation is a relative measure of dispersion. It the projects here the same cost but different net present values, relatives measure, i.e., Co-efficient of variation should be risk induced. It can be calculated as:
Co-efficient of variation = Standard deviation/mean × 100
If the co-efficient of variation of project ‘X’ in more then that ‘Y’ project X in more risk. Hence, project Y should be selected.
Co-efficient of variation method For Risk And Uncertainty In Capital Budgeting
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