a) A paid an annual dividend of $3 on its common stock and promises that the dividend will grow by 3% per year. If the stocks market price is $20, what is the required rate of return for this stock?

(b) B is currently paying dividends of $0.70 a share. These dividends are expected to grow at a rate of 10% for the next two years and at a constant growth rate of 3.5% thereafter. What would be the current price of Datasoft shares given a required return of 15%?

(c) Formally derive and discuss the dividend discount model used for the valuation of common stocks.