Assume an average dividend payout rate of 60% for U.S. 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 U.S. companies, how much higher would the Japanese annual earnings growth rate have to be?

d) 2.83% <- answer : WHY?