3.Stock A has PIE : 15 stock Bhas PIE : 35 A ) which stock is better B ) what does this difference tell us about there stocks C ) which stock would perform be tter in the bull market P / E of A = 15 P / E of B = 35 Now need to understand what are the factors that determine a firms The factors are 1 ) Growth Potential - Higher growth firms tend to have a higher P / E 2 ) Cost of capital - Firms with higher cost of capital will have lower P / E 3 ) Dividend payout ratio - Firr Firms with higher dividend payout ratios will have a higher