Given the following information, calculate the expected value for Firm C\'s EPS.

Question

1. Given the following information, calculate the expected value for Firm C's EPS. Data for Firms A and B are as follows: E(EPSA) = $5.10, and ?A = $3.60; E(EPSB) = $4.20, and ?B = $2.98. Round your answer to two decimal places.
   
2. Probability 0.1 0.2 0.4 0.2 0.1 Firm A: EPSA ($1.68) $1.80 $5.10 $8.40 $11.88 Firm B: EPSB (1.20) 1.31 4.20 7.09 9.60 Firm C: EPSC (2.52) 1.35 5.10 8.85 12.72
3. 
   $   {C}
   
4. You are given that ?c = $4.12. Discuss the relative riskiness of the three firms' earnings using their respective coefficients of variation. Round your answer to two decimal places. CV A B C
   
   The most risky is

Probability 0.1 0.2 0.4 0.2 0.1 Firm A: EPSA ($1.68) $1.80 $5.10 $8.40 $11.88 Firm B: EPSB (1.20) 1.31 4.20 7.09 9.60 Firm C: EPSC (2.52) 1.35 5.10 8.85 12.72

Explanation / Answer

for Firm C

E(EPSc) = -2.52*.1+1.35*.2+5.1*.4+8.85*.2+12.72*.1 = $5.1

4.

CV = standard deviation/Expected return

CVa = 3.6/5.1 = .7058

CVb = 2.98/4.2 = .709

CVc = 4.12/5.1 = .807

CV is standard deviation or risk per unit exp return

mimium the CV less risky the company is,

so most risky is company C

least risky is Company A

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