Treynor Pie Company is a food company specializing in high-calorie snack foods. It is seeking...
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Treynor Pie Company is a food company specializing in high-calorie snack foods. It is seeking to diversify its food business and lower its risks. It is examining three companiesa gourmet restaurant chain, a baby food company, and a nutritional products firm. Each of these companies can be bought at the same multiple of earnings. The following represents information about all the companies.
Company
Correlation with Treynor Pie Company
Sales ($ millions)
Expected Earnings ($ millions)
Standard Deviation in Earnings ($ millions)
Treynor Pie Company
+
1.0
$
185
$
12
$
3.0
Gourmet restaurant
+
0.6
72
9
1.3
Baby food company
+
0.1
51
6
1.8
Nutritional products company
0.6
79
8
3.4
a-1. Compute the coefficient of variation for each of the four companies. (Enter your answers in millions (e.g., $100,000 should be entered as ".10"). Round your answers to 3 decimal places.)
a-2. Which company is the least risky?
multiple choice 1
Baby food company
Nutritional products company
Gourmet restaurant
Treynor Pie Company
a-3. Which company is the most risky?
multiple choice 2
Nutritional products company
Treynor Pie Company
Baby food company
Gourmet restaurant
b. Which of the acquisition candidates is most likely to reduce Treynor Pie Company's risk?
multiple choice 3
Gourmet restaurant
Nutritional products company
Baby food company
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