Question
ch.13 Q 3 Treynor Pie Company is a food company specializing in high-calorie snack foods. It is seeking to diversify its food business and lower
ch.13 Q 3
Treynor Pie Company is a food company specializing in high-calorie snack foods. It is seeking to diversify its food business and lower its risks. It is examining three companiesa gourmet restaurant chain, a baby food company, and a nutritional products firm. Each of these companies can be bought at the same multiple of earnings. The following represents information about all the companies.
| Company | Correlation with Treynor Pie Company | Sales ($ millions) | Expected Earnings ($ millions) | Standard Deviation in Earnings ($ millions) | ||||||||||||||||||||||||||||||||||||||||||||
| Treynor PieCompany | + | 1.0 | $ | 158 | $ | 8 | $ | 2.0 | ||||||||||||||||||||||||||||||||||||||||
| Gourmet restaurant | + | .5 | 66 | 6 | 1.2 | |||||||||||||||||||||||||||||||||||||||||||
| Baby food company | + | .4 | 56 | 4 | 1.9 | |||||||||||||||||||||||||||||||||||||||||||
| Nutritionalproducts company | .6 | 79 | 5 | 3.5 | ||||||||||||||||||||||||||||||||||||||||||||
| a-1. Compute the coefficient of variation for each of the four companies.
A:2 Which company is the least risky?
a-3. Which company is the most risky?
b. Which of the acquisition candidates is most likely to reduce Treynor Pie Company's risk?
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Project Finance In Theory And Practice Designing Structuring And Financing Private And Public Projects
Authors: Stefano Gatti
4th Edition
032398360X, 9780323983600
