a-1. Compute the coefficient of variation for each of the four companies. (Enter your answers in millions (e.g., $100,000 should be entered as ".10"). Round your answers to 3 decimal places.) a-2. Which company is the least risky? multiple choice 1 Nutritional products company Treynor Pie Company Baby food company Gourmet restaurant a-3. Which company is the most risky? multiple choice 2 Nutritional products company Gourmet restaurant Treynor Pie Company Baby food company b. Which of the acquisition candidates is most likely to reduce Treynor Pie Company's risk?
Treynor Pie Company is a food company specializing in high-calorie snack foods. It is seeking to diversify its food business and lower its risks. It is examining three companies—a gourmet restaurant chain, a baby food company, and a nutritional products firm. Each of these companies can be bought at the same multiple of earnings. The following represents information about all the companies.
| Company | Correlation with Treynor Pie Company |
Sales ($ millions) |
Expected Earnings ($ millions) |
Standard Deviation in Earnings ($ millions) |
||||||||
| Treynor Pie Company | +1.0 | $ 151 | $ 8 | $4.0 | ||||||||
| Gourmet restaurant | +0.6 | 63 | 7 | 1.2 | ||||||||
| Baby food company | +0.3 | 59 | 3 | 1.9 | ||||||||
| Nutritional products company | −0.8 | 75 | 5 | 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.)
a-2. Which company is the least risky?
multiple choice 1
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Nutritional products company
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Treynor Pie Company
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Baby food company
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Gourmet restaurant
a-3. Which company is the most risky?
multiple choice 2
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Nutritional products company
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Gourmet restaurant
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Treynor Pie Company
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Baby food company
b. Which of the acquisition candidates is most likely to reduce Treynor Pie Company's risk?
multiple choice 3
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Gourmet restaurant
-
Baby food company
-
Nutritional products company
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