EBK CFIN
EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 12, Problem 6PROB
Summary Introduction

Expected EPS:

Estimated income to be earned from a company to its equity shareholders. EPS stands for earnings per share.

Calculate the expected EPS as follows:

Expected EPS=(EPS×Probability)

Standard deviation is used to measure the risk of the investment.

Calculate the standard deviation as follows:

Standard deviation=((EPSExpected EPS)2×Probability)

Coefficient of variation:

It is ratio of standard deviation to expected return.

Calculate the coefficient of variation as follows:

Coefficient of variation=Standard deviationExpected return

EPS for two firms is given. Calculate the expected value, standard deviation and coefficient of variation for the both the firms

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