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. -5%.

B. +3%.

C. +2%.

D. -3%.