Assume an Average Dividend Payout Rate of 60% for U

question 3

Multiple Choice

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?

• A)8.74%
• B)3.45%
• C)7.60%
• D)2.83%

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Definitions:

Testable Hypothesis

A clearly formulated hypothesis that can be tested through scientific methods, allowing for empirical verification or falsification.

Research Variables

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