Quick Start, Inc

Multiple Choice

Quick Start, Inc.is expected to pay a dividend of $1.05 next year and dividends are expected to continue their 7 percent annual growth rate.The SML has been estimated as follows:
Kⱼ = 0.08 + 0.064βⱼ
If Quick Start has a beta of 1.1, what would happen to its stock price if inflation expectations went from the current 5 percent to 8 percent?

A) decrease $8.14
B) decrease $3.55
C) decrease $3.18
D) stock price will not change