$(12$ points$)$ Non$-$constant Growth Stock

The last dividend paid by Company A was $$2\mathrm{.}4.$ Dividends are expected to grow at

a rate of $2\mathrm{.}5$ percent for the next three years and then at a rate of $6$ percent forever.

The company's stockholders require a rate of return on equity of $12$ percent.

a$.$ Draw a clear and accurate timeline of the expected cash flows.

$(4$ marks$)$

$($The timeline should consist of time periods $(t=0,1,2,$dots$),$ the dividend growth

rate$($s$),$ and the cash flow associated with each period.$)$

b$.$ What is $P_0,$ the current price of the stock?

$(4$ marks$)$

c$.$ What is hat$(P{)}_1,$ the expected price of the stock a year later at $t=1?$

$(4$ marks$)$