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:

Acetylcholine

A neurotransmitter in both the central and peripheral nervous systems that plays a key role in muscle activation and is involved in several cognitive functions.

Deficiency

The lack or insufficiency of something necessary, often used in the context of nutritional, mental, or emotional needs.

Neurogenesis

The process by which new neurons are formed in the brain, contributing to brain plasticity and possibly to aspects of learning and memory.

Human Brain

The central organ of the human nervous system, responsible for processing sensory information, regulating bodily functions, and enabling consciousness, thoughts, and emotions.