(Please use a math, finance equation and/ or formula. DONT USE A SHEET CHART, EXCEL, OR GRAPH)

14) ACME Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect ACME to begin paying dividends, beginning with a dividend of 2.50 coming 3 years from today. The dividend will grow rapidly at a rate of 25% per year during Years 4 and 5, but after Year 5, growth be a constant 5% per year. If the required return on ACME is 12%, what is the compounded annual growth rate of capital gains for the first 5 years? (Hint: find today's stock price, the stock price at year 5, then compounded growth rate).

8.78%

7.33%

7.57%

8.35%

7.92%