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 = $3.61; E(EPSB) = $4.20, and ?B = $2.94. Round your answer to two decimal places.
   
   
2. Probability 0.1 0.2 0.4 0.2 0.1 Firm A: EPSA ($1.61) $1.80 $5.10 $8.40 $11.81 Firm B: EPSB (1.20) 1.30 4.20 7.10 9.60 Firm C: EPSC (2.53) 1.35 5.10 8.85 12.73
3. 
   $  
   
   

You are given that ?c = $4.11. Discuss the relative riskiness of the three firms' earnings using their respective coefficients of variation. Round your answer to two decimal places. CVABC

1. 
   
   The most risky is -Select-ABCItem 5

Probability 0.1 0.2 0.4 0.2 0.1 Firm A: EPSA ($1.61) $1.80 $5.10 $8.40 $11.81 Firm B: EPSB (1.20) 1.30 4.20 7.10 9.60 Firm C: EPSC (2.53) 1.35 5.10 8.85 12.73

Explanation / Answer

EPs fpr firm C = 0.1*-2.51 + 0.2*1.35 + 0.4*5.1 + 8.85*0.2 + 12.71*0.1 = 5.1 answer

Coeficicernt of variation

A = 3.61/5.1 = 0.707
B = 2.94/ 4.2 = 0.70
C = 4.12/5.1 = 0.81

Project B is the least risky as it has lowest coefficient of variation

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1] expected value for Firm C's EPS = mean = 5.1

FIRM

MEAN

S.D.

COEFFECIENT OF VARIATION =

(SD /MEAN)*100

A

5.1

3.61

(3.61/5.1)* 100 = 70.78%

B

4.2

2.94

(2.94/4.2)*100 = 70.00%

C

5.1

4.12

(4.12/5.1)*100 =80.78%

THE LEAST RISKY FIRM IS FIRM

1] expected value for Firm C's EPS = mean = 5.1

FIRM

MEAN

S.D.

COEFFECIENT OF VARIATION =

(SD /MEAN)*100

A

5.1

3.61

(3.61/5.1)* 100 = 70.78%

B

4.2

2.94

(2.94/4.2)*100 = 70.00%

C

5.1

4.12

(4.12/5.1)*100 =80.78%

THE LEAST RISKY FIRM IS FIRM

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