Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Ultra High Net Worth Bankers Handbook

Authors: Heinrich Weber, Stephan Meier

1st Edition

1905641753, 978-1905641758

More Books

Students also viewed these Finance questions