Business and Financial Risk Here are the estimated ROE distributions for Firms A, B. and C:

a. Calculate the expected value and standard deviation for Firm C‘s ROE. ROEA = 10.0%, σA = 5.5%; ROEB = 12.0%, σB = 7.7%.
b. Discuss the relative risk of the three firms' returns. (Assume that these distributions are expected to remain constant over rime.)
c. Now suppose all three firms have the same standard deviation of basic earning power (EBIT/Total assets), σA = σB = σC = 5.5%. What can we tell about the financial risk of eachfirm?

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Probability 0.2 0.4 0.2 0.1 Firm A: ROFA Firm B: RO2.0 Firm C: ROFc 5.0 วี0% 5.0 10.0% 12.0 15.0 15.0% 19.0 20.0% 26.0 35.0 ()(y% 25.0