3. New Company's sales and profits are growing rapidly, and so is its dividend. Its dividend is growing at an annual rate of 25%. This growth in the dividend is expected to continue for two years. After that, the rate of growth is expected to slow down to 10% per year. The investors' required rate of return on the stock is 16%.

The next annual dividend is expected to be $1.00.

The beta of New Company's stock is 1.5.

The U.S. Treasury bill rate is 4%.

What is the risk premium that investors require to invest in New Company's stock?