Surgical Supplies Corporation paid a dividend of $$1\mathrm{.}12$ per share over the last $12$ months. The dividend is expected to grow at a rate of $25$ percent over the next three years $($supernormal growth$).$ It will then grow at a normal, constant rate of $7$ percent for the foreseeable future. The required rate of return is $12$ percent $($this will also serve as the discount rate$).$

a$.$ Compute the anticipated value of the dividends for the next three years $,$ and $D_3).$

b$.$ Discount each of these dividends back to the present at a discount rate of $12$ percent and then sum them.

c$.$ Compute the price of the stock at the end of the third year $(P_3).$

$P_3=\frac{D_4}{K_e-g}$

d$.$ After you have computed $P_3,$ discount it back to the present at a discount rate of $12$ percent for three years.

e$.$ Add together the answers in part $b$ and part $d$ to get the current value of the stock. $($This answer represents the present value of the first three periods of dividends plus the present value of the price of the stock after three periods.$)$