Hooper Chemical Company, a major chemical firm that uses such raw materials as carbon and petroleum...

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Finance

Hooper Chemical Company, a major chemical firm that uses suchraw materials as carbon and petroleum as part of its productionprocess, is examining a plastics firm to add to its operations.Before the acquisition, the normal expected outcomes for the firmwere as follows:

Outcomes
($ millions) Probability
Recession $ 35 .4
Normal economy 55 .2
Strong economy 75 .4
Compute the expected value, standard deviation, and coefficientof variation prior to the acquisition. (Do not roundintermediate calculations. Enter your dollar answers in millionsrounded to 2 decimal places (e.g., $12,300,000 should be entered as"12.30"). Round the coefficient of variation to 3 decimalplaces.)

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4.3 Ratings (875 Votes)

	Probability (P)	RETURN (Y)	(P * Y )	P * (Y -Average Return of Y)^2
RECESSION	40%	35	14.00	160.00
NORMAL ECONOMY	20%	55	11.00	0.00
STRONG ECONOMY	40%	75	30.00	160.00
		TOTAL	55.00	320.00


Expected Return =		(P * Y)
		55.00

VARIANCE =		P * (Y -Average Return of Y)^2
		320.00


Standard Deviation =		Square root of (P * (Y -Average Return of Y)^2)
		Square root of 320
		17.89

COEFFICIENT OF VARIATION=		STANDARD DEVIATION/ MEAN
		17.89 / 55
		0.325

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Outcomes
($ millions)

Probability

Normal economy

Strong economy

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Hooper Chemical Company, a major chemical firm that uses suchraw materials as carbon and petroleum as part of its productionprocess, is examining a plastics firm to add to its operations.Before the acquisition, the normal expected outcomes for the firmwere as follows: Outcomes($ millions)ProbabilityRecession$35.4Normal economy55.2Strong economy75.4Compute the expected value, standard deviation, and coefficientof variation prior to the acquisition. (Do not roundintermediate calculations. Enter your dollar answers in millionsrounded to 2 decimal places (e.g., $12,300,000 should be entered as"12.30"). Round the coefficient of variation to 3 decimalplaces.)