The financial manager of the Variable Corporation has looked into the department’s crystal ball and estimated the earnings per share for Variable under three possible outcomes. This crystal ball is a bit limited, for it can only make projections regarding the earnings per share and the probability that each will occur. Unfortunately, it can- not tell the financial manager which of the three possible outcomes will occur. The data provided by the crystal ball indicates:
Economic Environment |
Probability |
Earnings per Share |
Good |
50% |
$10.00 |
OK |
20% |
$5.00 |
Bad |
30% |
$1.00 |
Help the financial manager assess this data by calculating the expected earnings per share and the standard deviation of earnings per share for Variable Corporation.