Question

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

	Outcomes ($ millions)			Probability
Recession	$	20			.2
Normal economy		30			.2
Strong economy		50			.6

Compute the expected value, standard deviation, and coefficient of variation prior to the acquisition. (Do not round intermediate calculations. Enter your dollar answers in millions rounded to 2 decimal places (e.g., $12,300,000 should be entered as "12.30"). Round the coefficient of variation to 3 decimal places.)
  

Answer 1

Hooper
Scenario	Probability	Outcome	=Outcome * probability	Actual outcome -expected outcome	(A)^2* probability
Recession	0.2	20	4	-20	0.008
Normal	0.2	30	6	-10	0.002
Strong	0.6	50	30	10	0.006
	Expected value=	sum of weighted outcome =	40	Sum=Variance Hooper=	0.016
			Standard deviation of Hooper%	=(Variance)^(1/2)	12.65
			Coefficient of variation=	Std. dev./expected outcome=	0.3163