Concept explainers
a.
To calculate: The mean, standard deviation and coefficient of variation for both investments made by General Meters, that is, with firm A and with Firm B.
Introduction:
Mean:
It is the value estimated or anticipated to be earned in the future from an investment. It is computed by adding up the values obtained after multiplying each outcome with its probability.
Standard deviation (S.D):
A statistical tool that helps measure the deviation or volatility of an investment is termed as standard deviation. It is the square root of variance.
Coefficient of variation ( CoV ):
It is the ratio of SD (standard deviation) to the mean that shows the extent of variability of data in relation to the mean of the population.
b.
To determine : The alternative that brings a higher valuation,assuming that the investors are risk averse.
Introduction:
Merger:
An agreement between two existing companies that combines them to form a single company is termed as a merger. This is done for the expansion of business, share in the market, and value of shareholders.
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FOUND.OF FINANCIAL MANAGEMENT-ACCESS
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