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:

Time-Consuming

Describes activities or tasks that require a considerable amount of time to complete, often implying a trade-off with efficiency or productivity.

Observer Influence

The effect that the presence or actions of an observer can have on the behavior of the subject being studied.

Misinterpreted

Misinterpreted refers to the incorrect understanding or interpretation of information, words, or actions.

Behaviorists

Psychologists who emphasize the study of observable behaviors and the processes of learning, often through conditioning, without reference to mental states.