Aggarwal enterprises is considering a new project that has a cost of 1,000,000 and the CFO set up the following simple decision tree to show its three most likely scenarios. The firm could arrange with its work force and suppliers to cease operations at the end of year 1 should it choose to do so, but to obtain this abandonment option, it would have to make a payment to those parties. Calculate the projects coefficient of variation.
(Dollars in thousands)
T=0 T=1 T=2 T=3
Prob.= 20% 800 800 800
Prob.=60% -1000 520 520 520
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