Bill Bailey and Sons Pays No Dividend at the Present

Bill Bailey and Sons pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $.30 a share for two years commencing two years from today. After that time, the company plans on paying a constant $1 a share dividend indefinitely. How much are you willing to pay to buy a share of this stock if your required return is 14%?

A) $4.82
B) $5.25
C) $5.39
D) $5.46
E) $5.58