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

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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a. 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, σA =$3.61, E(EPSB) =$4.20, and σB = $2.96.

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

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