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Social media companies A and B are expected to pay dividends in the form of a growing perpetuity. All earnings are paid out as dividends,

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Social media companies A and B are expected to pay dividends in the form of a growing perpetuity. All earnings are paid out as dividends, so earnings = dividends. The companies generate earnings that depend on the companies' total sales and their profit margins. Total sales depend on the total hours that users use the platform and the amount of revenue the company can get per hour of platform usage. Total hours of platform usage depend on number of users and the average hours per user. In addition: Given information for A and B: Growth rate: A is lower Required rate of return: A is higher Profit margin: same Sales per Hour: A is higher Average Hours per User: A is higher You may assume that for each company, margin, sales per hour, and average hours per user does not change over time Which company should have a higher PE ratio? . OB They should have the same PE ratio Not enough information to determine which company should have the higher PE ratio

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