CHAPTER 14 PROBLEM 7

FINANCE  Investment Analysis and Portfolio Management CHAPTER 14 PROBLEM 7
 You are given the following information about two computer software firms and the S&P   Industrials   Company A;            Company B;            S&P Industrials
 P/E ratio----30.0;            27.0;            18.0  
 Expected annual growth rate----0.18;            0.15;            0.07  
Dividend yield----0.00;            0.01;            0.02   
a. Compute the growth duration of each company stock relative to the S&P Industrials.
  b. Compute the growth duration of Company A relative to Company B. 
  c. Given these growth durations, what determines your investment decision?

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