General Meters is considering two mergers. The first is with Firm A in its own volatile...
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General Meters is considering two mergers. The first is with Firm A in its own volatile industry, the auto speedometer industry, while the second is a merger with Firm B in an industry that moves in the opposite direction (and will tend to level out performance due to negative correlation). General Meters Merger with Firm A General Meters Merger with Firm B Possible Earnings ($ Possible Earnings ($ in in millions) Probability millions) Probability $ 10 0.20 $ 10 20 30 0.20 0.60 2230 0.15 0.30 0.55 a. Compute the mean, standard deviation, and coefficient of variation for both investments Note: Do not round intermediate calculations. Enter your answers in millions. Round "Coefficient of variation" to 3 decimal places and "Standard deviation" to 2 decimal places. Answer is complete but not entirely correct. Merger A Merger B Mean $ 24,000,000 $ Standard deviation $ 6.93 X $ Coefficient of variation $ SA 0.289 $ 26 X 6.12 X 0.240 X b. Assuming investors are risk-averse, which alternative can be expected to bring the higher valuation? Merger A Merger B General Meters is considering two mergers. The first is with Firm A in its own volatile industry, the auto speedometer industry, while the second is a merger with Firm B in an industry that moves in the opposite direction (and will tend to level out performance due to negative correlation). General Meters Merger with Firm A General Meters Merger with Firm B Possible Earnings ($ Possible Earnings ($ in in millions) Probability millions) Probability $ 10 0.20 $ 10 20 30 0.20 0.60 2230 0.15 0.30 0.55 a. Compute the mean, standard deviation, and coefficient of variation for both investments Note: Do not round intermediate calculations. Enter your answers in millions. Round "Coefficient of variation" to 3 decimal places and "Standard deviation" to 2 decimal places. Answer is complete but not entirely correct. Merger A Merger B Mean $ 24,000,000 $ Standard deviation $ 6.93 X $ Coefficient of variation $ SA 0.289 $ 26 X 6.12 X 0.240 X b. Assuming investors are risk-averse, which alternative can be expected to bring the higher valuation? Merger A Merger B
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