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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. Correlation with Treynor Pie Company + 1.0 + 0.6 + 0.2 -0.5 Company Treynor Pie Company Gourmet restaurant Baby food company Nutritional products company Sales ($ millions) $ 162 66 57 74 Expected Earnings ($ millions) $10 Standard Deviation in Earnings ($ millions) $ 4.0 1.6 1.6 3.5 7 3 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? O Gourmet restaurant Treynor Pie Company O Baby food company O Nutritional products company a-3. Which company is the most risky? Nutritional products company Baby food company Gourmet restaurant O Treynor Pie Company b. Which of the acquisition candidates is most likely to reduce Treynor Pie Company's risk? Baby food company Gourmet restaurant Nutritional products company
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