Assume an Average Dividend Payout Rate of 100% for Both

question 36

Multiple Choice

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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Definitions:

Securities Registration Statement

A document filed with the SEC that includes details about a company's financial status, the securities to be sold, and the offer's terms, required for public offerings.

Securities Exchange Act of 1934

United States legislation that governs the trading of securities, such as stocks and bonds, to protect investors against fraud.

Purpose

The reason for which something is done or created, or for which something exists. It serves as a guiding principle in decision-making and strategy.

Registration Form S-4

A form used by a company for registering securities that will be exchanged in a merger or acquisition with the SEC.