Newcomer Mills Is a Relatively New Firm Which Will Retain

Newcomer Mills is a relatively new firm which will retain all of its earnings for the next three years. Four years from now, the firm expects to pay its first dividend of $0.15 a share. After that, it intends to increase the dividend by 5 percent annually. What is the value of this stock today at a discount rate of 10 percent?

A) $1.53
B) $1.78
C) $2.04
D) $2.25
E) $2.60