Question $2(11$ marks$)$

You were assigned to carry out fundamental analysis of a mature industry in a developed

country. You have gathered the following fundamental data about macroeconomic and

industry conditions that are required for your analysis:

Your boss recently asked you to cover the same industry in an emerging country. You study

three fundamental factors in these two countries. The table below provides relevant data

about the three factors.

Required

a$.$ Compute the price$-$to$-$earnings $($P$/$E$)$ ratio for this industry in the developed country

based on the above information. $(5$ marks$)$

b$.$ You want to analyze how the industry P$/$E ratios might differ between the two

countries. Discuss whether each of the three fundamental factors, by itself alone,

would cause the industry $\frac{P}{E}$ ratio to be generally higher for the developed country

than for the emerging country. $(6$ marks$)$