Question

a. Given the following information, calculate the expected value for Firm C's EPS. Data for Firms A and B are as follows: E(EPSA) = $5.10, and aA = $3.62; E(EPSB) = $4.20, and oB = $2.98. Do not round intermediate calculations. Round your answer to the nearest cent. Probability 0.2 0.1 0.1 0.2 0.4 Firm A: EPSA ($1.65) $1.80 $5.10 $8.40 $11.85 Firm B: EPSB 7.05 (1.20) 1.35 4.20 9.60 Firm C: EPSC |(2.50) 1.35 5.10 8.85 12.70 E(EPSC): $ b. You are given that oc = round intermediate calculations. Round your answers to two decimal places. $4.10. Discuss the relative riskiness of the three firms' earnings using their respective coefficients of variation. Do not CV A В C The most risky firm is -Select-

Answer 1

1.
=0.1*(-2.50)+0.2*1.35+0.4*5.10+0.2*8.85+0.1*12.70
=5.1000

2.
=3.62/5.10
=0.7098

3.
=2.98/4.20
=0.7095

4.
=sqrt(0.1*(-2.50-5.10)^2+0.2*(1.35-5.10)^2+0.4*(5.10-5.10)^2+0.2*(8.85-5.10)^2+0.1*(12.70-5.10)^2)/5.1000
=0.8126

5.
Firm C