Assume an average dividend payout rate of 100% for both U.S. and Japanese companies. Suppose the average
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Question:
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?
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