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:

Discrimination

refers to unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age, sex, or disability.

Prejudice

A preconceived opinion or judgment towards people or ideas without proper knowledge, fairness, or reason.

Discrimination

Unfair or prejudicial treatment of individuals or groups based on characteristics such as race, gender, age, or sexual orientation.

Cultural Orientation

The inclination of individuals or groups towards certain beliefs, practices, and priorities shaped by their cultural background.