Use the Information for the Question(s)below

question 56

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 alpha for Chihuahua is closest to:

• A)+2%.
• B)-5%.
• C)-3%.
• D)+3%.

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Definitions:

Puberty

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An educational institution for children typically in the early adolescent years, serving as a bridge between elementary school and high school.

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An educational level that serves as a bridge between elementary school and high school, typically including grades 7 through 9.

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A game played with babies that involves hiding and suddenly reappearing, intended to entertain and develop the child's understanding of object permanence.