Assume the Shelton Corporation is considering the acquisition of Cook Inc. The expected EPS for the Shelton Corporation will be $3.00 with or without the merger. However, the standard deviation of the earnings will decrease from $1.89 to $1.20 with the merger because the two firms are negatively correlated.
a. Compute the coefficient of variation for the Shelton Corporation before and after the merger (consult Chapter 13 to review statistical concepts if necessary).

b. Discuss the possible impact on Shelton's postmerger P/E ratio , assuming investors are risk averse.