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:

REM Sleep

A stage of sleep characterized by rapid eye movements, low muscle tone, and the potential for dreams to occur, important for memory consolidation and mood regulation.

Slow-Wave Sleep

The deep sleep phase characterized by slow brain waves, minimal body movement, and diminished responsiveness to external stimuli, critical for restorative sleep.

Insomnia

A condition causing trouble with falling asleep, maintaining sleep, or achieving refreshing sleep.

Slow-Wave Sleep

A deep stage of sleep characterized by slow brain waves, known for its role in restorative sleep functions.