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Assume an average dividend payout rate of 100% for both U.S. and Japanese companies. Suppose the average P/E ratio for Japanese firms is 38 and
Assume an average dividend payout rate of 100% for both U.S. and 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 and U.S. companies to have the same average cost of equity capital, how much higher would the Japanese annual earnings growth rate have to be?
a)7.24%
b)6.31%
c)5.83%
d)8.39%
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