In the recent annual general meeting of iumi technology limited, the board of directors declared an annual dividend of $2.50 per share, and the shareholders agreed to a rights issue of shares in order to raise funds to expand the business to the provinces.

Required:

a) The shareholders expects the dividend rate of $2.50 per share to decline at a rate of 5% in the next year and grow at a constant rate of 10% indefinitely as the business expands to all provinces, suppose these shareholders hold a required rate of return of 20%, What is the price of each share to them?

b) The board of directors expect a required rate of return of 10% and no decline or growth in the dividend per share. What is the price of each share to them?