A share of stock is now selling for $125. It will pay a dividend of $8 per share at the end of the year. Its beta is 1. What must investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 7% and the expected rate of return on the market is 19%. (Round your answer to 2 decimal places.)

Investors must pay $140.75  for the share

Explanation:

Using Miller and Modgiliani CAPM formula, the return on the stock is calculated thus:

ERi=Rf+βi(ERm−Rf)

Rf is the risk-free rate of 7%

Beta is 1

(ERm−Rf) =19%-7%=12%

ERi=7%+1(12%)

ERi=19%

the expected selling price can be computed using the below formula:

return on  investment=(expected selling price+dividend)/current price+1

return on investment is 19%

dividend $8

current price $125

expected selling price is the unknown

0.19=(expected selling price +$8)/$125+1

1.19=(expected selling price +$8)/$125

1.19*$125=expected selling price +$8

expected selling price =(1.19*$125)-$8

                                       =$140.75

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

your welcome leave a rate and a < 3

107x106 is the answer