Two projects have the following NPVs and standard deviations:
Project A Project B
NPV 200 300
Standard deviation 75 100
Which of the two projects is more risky?
Since the two projects have different NPVs and different standard deviations, relative risk can be measured by the coefficient of variation. Project A has a CV of.375, project B .333. Thus, the relative risk of project B is less.
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