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Please see the attached multi-tier problem.: 2) Gibson Appliance) Gibson Appliance Co is a very stable billion-dollar company with a sales growth of
Please see the attached multi-tier problem.:2) Gibson Appliance)Gibson Appliance Co is a very stable billion-dollar company with a sales growth of about 7% per year in good or bad economic conditions. Because of this stability (a coefficient of correlation with the economy of + .4 and a standard deviation of sales of about 5% from the mean), Mr Hoover, the vice-president of finance, thinks the company could absorb a small risky company that could add quite a bit of return without increasing the company's risk very much. He is trying to decide which of the 2 companies he will buy, using the figures below. Gibson's cost of capital is 12%.Genetic Technology Co(cost $80 million)
