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Treynor Pie Company is a food company specializing inhigh-calorie snack foods. It is seeking to diversify its foodbusiness and lower its risks. It is examining three companies—agourmet restaurant chain, a baby food company, and a nutritionalproducts firm. Each of these companies can be bought at the samemultiple of earnings. The following represents information aboutall the companies. Company Correlation with Treynor Pie CompanySales ($ millions) Expected Earnings ($ millions) StandardDeviation in Earnings ($ millions) Treynor PieCompany + 1.0 $ 104 $8 $ 2.0 Gourmet restaurant + .7 64 8 1.5 Baby food company + .2 525 1.7 Nutritionalproducts company ? .8 74 7 3.2 a-1. Compute thecoefficient of variation for each of the four companies. (Enteryour answers in millions (e.g., $100,000 should be entered as".10"). Round your answers to 3 decimal places.) a-2. Which companyis the least risky? Nutritional products company Gourmet restaurantBaby food company Treynor Pie Company a-3. Which company is themost risky? Nutritional products company Treynor Pie Company Babyfood company Gourmet restaurant b. Which of the acquisitioncandidates is most likely to reduce Treynor Pie Company's risk?Nutritional products company Gourmet restaurant Baby foodcompany
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