Use the Information for the Question(s)below

question 13

Multiple Choice

Use the information for the question(s) below.
Consider two firms,Chihuahua Corporation and Bernard Industries that are each expected to pay the same $1.5 million dividend every year in perpetuity.Chihuahua Corporation is riskier and has an equity cost of capital of 15%.Bernard Industries is not as shaky as Chihuahua,so Bernard has an equity cost of capital of only 10%.Assume that the market portfolio is not efficient.Both stocks have the same beta and an expected return of 12%.
-The market value for Chihuahua is closest to:

• A)$10.0 million.
• B)$12.5 million.
• C)$12.0 million.
• D)$15 million.

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Definitions:

Constructionist Perspectives

A theoretical viewpoint that emphasizes the socially constructed nature of reality, suggesting that our understanding of the world is shaped through social interactions and cultural norms.

Constructionist

Pertaining to theories that social phenomena and categories are socially constructed through language, communication, and negotiation.

Deviance

Behaviors, actions, or conditions that violate social norms or values, ranging from minor breaches to major violations, often subject to social judgment.

Low-Consensus Deviance

This refers to actions or behaviors that some people or groups in society may consider deviant, but there is significant disagreement or lack of consensus about whether these actions are truly deviant.