Expected Return: Security Analysts that have evaluated Concordia Corporation have determined that there is a 15% chance that the firm will generate earnings per share of $2.40; a 60% probability that the firm will generate earnings per share of $3.10; and a 25% probability that the firm will generate earnings per share of $3.80. What are the expected earnings per share for Concordia Corporation? (Round off to the nearest $0.01)

Question

Quizplus · Accepted Answer

The expected earnings per share can be calculated as follows:
Expected earnings per share = (Probability of $2.40 EPS * $2.40) + (Probability of $3.10 EPS * $3.10) + (Probability of $3.80 EPS * $3.80)
= (0.15 * $2.40) + (0.60 * $3.10) + (0.25 * $3.80)
= $0.36 + $1.86 + $0.95
= $3.17
Therefore, the expected earnings per share for Concordia Corporation is $3.17. The best choice is B.

Expected Return: Security Analysts That Have Evaluated Concordia Corporation Have