The closing price of shares of XYZ ltd on December 31 previous year was $25. It paid a yearend dividend as detailed below:

Year 1

$ 2

Year 2

$ 2

Year 3

$ 2.20

Year 4

$ 2.50

Year 5

$2.50

a. At what price should an investor sell his shares at the end of year 5 to earn a compound rate of return 15% on the initial investment (of $25), ignore commissions and fees.

b. Dividends matter to investors. Critically analyse.