10.General Meters is considering two mergers. The first is with Firm A in its own volatile industry, the auto speedometer industry.While the second is a merger with Firm B in an industry that moves in the opposite direction (and will tend to level out performance due to negative correlation).

General Meters Merger w/ Firm AGeneral Meters Merger w/ Firm B

Possible Earnings ($M)ProbabilityPossible Earnings ($M)Probability

$20 million0.10$20 million0.05

$30 million0.30$30 million0.40

$40 million0.60$40 million0.55

a.Compute the mean, standard deviation, and coefficient of variation for both investments.

b.Assuming investors are risk-averse, which alternative can be expected to bring the higher valuation?