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Kayleigh Industries: Compute implied growth duration

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Chapter 14

Problem 5: What is the implied growth duration of Kayleigh Industries given following:

S&P Industrials Kayleigh Industries
P/E Ratios 16 24
Expected Growth 0.06 0.14
Dividend yield 0.04 0.02

Problem 7: You are given the following information about two computer software firms and the S&P Industrials:

Company A Company B Company C
P/E Ratios 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 duration, what determines your investment decision?

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Solution Summary

The solution computes implied growth duration of Kayleigh Industries.

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