
CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 12, Problem 7PROB
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:
Standard deviation is used to measure the risk of the investment.
Calculate the standard deviation as follows:
Coefficient of variation:
It is ratio of standard deviation to expected return.
Calculate the coefficient of variation as follows:
CFO of II has total assets of $5 million. II has estimated EBIT of $1.2 million with a probability is 0.2, EBIT is $800,000 with a probability of 0.5, and EBIT is $500,000 with a probability of 0.3.
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