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

Question

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 = $2.95. Round your answer to two decimal places.

E(EPSC) = $

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.

The most risky is

Probability 0.1 0.2 0.4 0.2 0.1 Firm A: EPSA ($1.60) $1.80 $5.10 $8.40 $11.80 Firm B: EPSB (1.20) 1.36 4.20 7.04 9.60 Firm C: EPSC (2.58) 1.35 5.10 8.85 12.78

Explanation / Answer

E(EPSC) = 0.1*(-2.58) + 0.2*1.35 + 0.4*5.1 + 0.2*8.85 + 0.1*12.78 = 5.1%

CV (A) = 3.6 / 5.1 = 0.706

CV (B) = 2.95 / 4.2 = 0.702

CV (C) = 4.11 / 5.1 = 0.806

C is risky because CV is high

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