a Given the following information, calculate the expected value for Firm Cs EPS Data for Firms A and B are as follows E(EPS A ) $5 10, and A $3 61 E(EPS B ) $4 20, and B $2 96 b You are given that C $4 11 Discuss the relative riskiness of the three firms earnings PROBABILITY 0 1 0 4 $5 10 4 20 0 2 $8 40 6 90 0 2 $1 80 1 50 0 1 Firm A EPS, Firm B EPS, Firm C EPS, (1 50) (1 20) (2 40) $11 70 9 60 1 35 8 85 5 10 12 60

Question: a. Given the following information, calculate the expected value for Firm Cs EPS. Data for Firms A and B are as follows: E(EPS A )

a. Given the following information, calculate the expected value for Firm C’s EPS. Data for Firms A and B are as follows: E(EPS_A) = $5.10, and σ_A = $3.61; E(EPS_B) = $4.20, and σ_B = $2.96.

PROBABILITY 0.1 0.4 $5.10 4.20 0.2 $8.40 6.90 0.2 $1.80 1.50 0.1 Firm A: EPS, Firm B: EPS, Firm C: EPS, (1.50) (1.20) (2

b. You are given that σ_C = $4.11. Discuss the relative riskiness of the three firms’ earnings.

PROBABILITY 0.1 0.4 $5.10 4.20 0.2 $8.40 6.90 0.2 $1.80 1.50 0.1 Firm A: EPS, Firm B: EPS, Firm C: EPS, (1.50) (1.20) (2.40) $11.70 9.60 1.35 8.85 5.10 12.60

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