7.3 The VSE Corporation currently pays no dividend because of depressed earnings.

A recent change in management promises a brighter future. Investors expect VSE topay a dividend of $1 next year (the end of year 1).

This dividend is expected to increase to $2.25the following year and to grow at a rate of 10 percent per annum for thefollowing two years (years 3 and 4).

Chuck Brown, a new investor, expects the price ofthe stock to increase 75percent in value between now (time zero) and the end ofyear 3.

If Brown plans to hold the stock for threeyears and requires a rate of return of25percent on his investment, what value would he place on the stock today