STRATEGIC FINANCIAL MANAGEMENT: (MBL5903)
ASSIGNMENT 01 ANSWERS (QSN 1-6)
Due date: 26 August 2024
Compiled by Ranga : Whatsapp 0618441387
Email:
Get in touch for tutorial services and personalized assistance
Order of question: 2,1,3,4,5,6
Question 2
a) Calculate the standard deviation of the expected sales
To calculate the standard deviation, we first need to determine the expected sales (mean) and then
use it to find the variance and standard deviation.
Expected Sales (Mean):
Expected sales=∑(Sales volume× Probability)
Expected sales= (5000×0.14)+ (8000×0.34)+ (12000×0.30)+(15000×0.12)+(17000× 0.10)
=700+2720+3600+1800+1700
=10520
Variance and Standard Deviation:
Variance=∑(Probability×(Sales Volume−Expected Sales))2)
=0.14×(5000−10520)2+0.34×(8000−10520)2+0.30×(12000−10520)2+0.12×(1
5000−10520)2+0.10×(17000−10520)2
= 13641600
Standard Deviation
, Standard Deviation=√Variance=√13641600 =3693
The standard deviation of the new composite hockey sticks’ expected sales is 3693 units.
b) Coefficient of Variation (CV)
The coefficient of variation (CV) is a relative measure of the variability of risk, calculated as:
CV= Standard Deviation/Expected Sales =3693/10520 =0.35 = 35%
Why CV is better than standard deviation
Relative Measure: CV is a relative measure of dispersion, which means it takes into
account the size of the mean. It allows for comparison between different data sets with
different units or widely different means.
Risk Assessment: In the context of financial performance, CV provides a better sense of
risk as it shows the extent of variability in relation to the expected return. A higher CV
indicates higher risk relative to the expected return.
c) Recommendation on expenditure
Given the high level of variability (CV of 0.35 or 35%), the project carries a moderate risk.
The decision to proceed should consider:
• Market Potential: If market research indicates strong demand and competitive
positioning for composite hockey sticks, the investment may be justified despite the risk.
• Risk Mitigation: Implementing risk mitigation strategies, such as phased investments,
partnering with experts, or securing pre-orders, can help manage and reduce risks.
Recommendation: Proceed with the project but adopt a cautious approach by monitoring
market trends closely and implementing risk mitigation strategies.
d) Issues in Discontinuing Wooden Hockey Stick
ASSIGNMENT 01 ANSWERS (QSN 1-6)
Due date: 26 August 2024
Compiled by Ranga : Whatsapp 0618441387
Email:
Get in touch for tutorial services and personalized assistance
Order of question: 2,1,3,4,5,6
Question 2
a) Calculate the standard deviation of the expected sales
To calculate the standard deviation, we first need to determine the expected sales (mean) and then
use it to find the variance and standard deviation.
Expected Sales (Mean):
Expected sales=∑(Sales volume× Probability)
Expected sales= (5000×0.14)+ (8000×0.34)+ (12000×0.30)+(15000×0.12)+(17000× 0.10)
=700+2720+3600+1800+1700
=10520
Variance and Standard Deviation:
Variance=∑(Probability×(Sales Volume−Expected Sales))2)
=0.14×(5000−10520)2+0.34×(8000−10520)2+0.30×(12000−10520)2+0.12×(1
5000−10520)2+0.10×(17000−10520)2
= 13641600
Standard Deviation
, Standard Deviation=√Variance=√13641600 =3693
The standard deviation of the new composite hockey sticks’ expected sales is 3693 units.
b) Coefficient of Variation (CV)
The coefficient of variation (CV) is a relative measure of the variability of risk, calculated as:
CV= Standard Deviation/Expected Sales =3693/10520 =0.35 = 35%
Why CV is better than standard deviation
Relative Measure: CV is a relative measure of dispersion, which means it takes into
account the size of the mean. It allows for comparison between different data sets with
different units or widely different means.
Risk Assessment: In the context of financial performance, CV provides a better sense of
risk as it shows the extent of variability in relation to the expected return. A higher CV
indicates higher risk relative to the expected return.
c) Recommendation on expenditure
Given the high level of variability (CV of 0.35 or 35%), the project carries a moderate risk.
The decision to proceed should consider:
• Market Potential: If market research indicates strong demand and competitive
positioning for composite hockey sticks, the investment may be justified despite the risk.
• Risk Mitigation: Implementing risk mitigation strategies, such as phased investments,
partnering with experts, or securing pre-orders, can help manage and reduce risks.
Recommendation: Proceed with the project but adopt a cautious approach by monitoring
market trends closely and implementing risk mitigation strategies.
d) Issues in Discontinuing Wooden Hockey Stick
