Answered step by step
Verified Expert Solution
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 companies-a 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. Expected Earnings ($ millions) Company Treynor Pie Company Gourmet restaurant Baby food company Nutritional products company Correlation with Treynor Pie Company + 1.0 + 0.5 + 0.4 - 0.6 Sales ($ millions) $ 158 66 56 79 Standard Deviation in Earnings ($ millions) $ 2.0 1.2 1.9 3.5 6 4 5 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.) Coefficient of Variation Treynor Pie Company Gourmet restaurant Baby food company Nutritional products company a-2. Which company is the least risky? Treynor Pie Company Nutritional products company O Baby food company Gourmet restaurant a-3. Which company is the most risky? Treynor Pie Company Baby food company O Gourmet restaurant Nutritional products company b. Which of the acquisition candidates is most likely to reduce Treynor Pie Company's risk? Gourmet restaurant O Nutritional products company O Baby food company
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started