Use the Information for the Question(s)below

question 66

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 Bernard is closest to:

• A)+5%.
• B)-2%.
• C)-3%.
• D)+2%.

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Definitions:

Freud's Original Theory

Refer to Sigmund Freud's foundational principles in psychoanalysis, which include the structure of the mind, psychosexual stages, and the role of unconscious thoughts.

Middle Children

Typically refers to siblings who are born in the middle of the birth order, often believed to have distinct personality traits due to their positioning.

Adler

Alfred Adler, an Austrian medical doctor and psychotherapist, and founder of the school of individual psychology, known for his concepts of inferiority complex and striving for superiority.

Positive

Refers to emotions, attitudes, or occurrences that are optimistic or beneficial in nature.