Question
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
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 Pie Company | + | 1.0 | $ | 102 | $ | 8 | $ | 2.0 | ||||||
Gourmet restaurant | + | 0.6 | 65 | 5 | 1.1 | |||||||||
Baby food company | + | 0.2 | 55 | 3 | 1.8 | |||||||||
Nutritional products company | 0.5 | 78 | 4 | 3.4 | ||||||||||
a-1. Compute the coefficient of variation for each of the four companies. (Enter your answers in millions (e.g., $100,000 should be entered as ".10"). Round your answers to 3 decimal places.)
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