Question: In early 1990 major Tokyo Stock Exchange issues sold for
In early 1990, major Tokyo Stock Exchange issues sold for an average 60 times earnings, more than four times the 13.8 price/earnings ratio for the S&P 500 at that time. According to Business Week (February 12, 1990, p. 76), ''Since p-e ratios are a guide to a company's cost of equity capital, this valuation gap implies that raising new equity costs Japanese companies less than 2% a year, vs. an average 7% for the U.S.'' Comment on this statement.
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