14.30 Assume an average dividend payout rate of 60% for US, companies and 35% for Japanese companies. Suppose the average P/E ratio for Japanese firms is 38 and 16 for U.S. firms. Based on the dividend growth model, in order for Japanese companies to have the same 12% average cost of equity capital estimated for US, companies, how much higher would the Japanese annual earnings growth rate have to be? a) 8.74% b) 3.45% c) 7.60% d) 2.83% Ans: d Section: The cost of equity capital Level: Difficult