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Explain diversification

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Question: Use the following table to answer the question. Boom Normal Recession 20% 40% 20% Probability $30 mil $20 mil $10 mil CF (Wegmans $20 mil $20 mil $20 mil CF (Firm A) $60 mil $40 mil $20 mil CF (Firm B) $15 mil $10 mil 5 mil CF (Firm C) $20 mil $10 m $30 mil CF (Firm D) Wegmans' management is planning to acquire another firm to reduce cash flow volatility. Which firm is the best candidate for diversification? [Hint: You don't need to do any calculations. Just look at cash flows]

a. Firm A

b. Firm B

c. Firm C

d. Firm D

Reference no: EM131441617

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