Managerial Economics: Applications, Strategy and Tactics 12th Edition by James McGuigan, Charles Moyer, Frederick Harris

Exercise 4

The demand for MICHTEC's products is related to the state of the economy. If the economy is expanding next year (an above-normal growth in GNP), the company expects sales to be $90 million. If there is a recession next year (a decline in GNP), sales are expected to be $75 million. If next year is normal (a moderate growth in GNP), sales are expected to be $85 million. MICHTEC's economists have estimated the chances that the economy will be either expanding, normal,or in a recession next year at 0.2, 0.5, and 0.3, respectively.
a. Compute expected annual sales.
b. Compute the standard deviation of annual sales.
c. Compute the coefficient of variation of annual sales.