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Transocean ic Airlines is examining a resort motel chain to add to its operation. Prior to the acquisition, the normal expected outcomes for the firm...

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Transocean ic Airlines is examining a resort motel chain to add to its operation. Prior to the acquisition, the normal expected outcomes for the firm are as follows: Outcomes ($ millions) Probability Recession $30 0.30 Normal economy 50 0.40 Strong economy 70 0.30 After the acquisition, the expected outcomes for the firm would be: Outcomes ($ millions) Probability Recession $10 0.30 Normal economy 50 0.40 Strong economy 100 0.30 a. Compute the expected value, standard deviation, and coefficient of variation prior to the acquisition. After the acquisition, these values are as follows:
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Expected value 53.0 ($ millions) Standard deviation 34.9 ($ millions) Coefficie nt of variation 0.658 b. Comment on whether this acquisition appears desirable to you. c. Do you think the firm's stock price is likely to go up as a result of this acquisition? d. If the firm were interested in reducing its risk exposure, which of the following three industries would you advise it to consider for an acquisition? Briefly comment on your answer. (1) Major travel agency (2) Oil company (3) Gambling casino Solution
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