3. Answer the following questions: a. The stock of company A has a beta of 0.5, while company B has a beta of 1.3. The T-bill rate is 6% and the expected return of the market portfolio is 12%. An investor is looking to invest one-third of his wealth in Company A and the remainder in Company B. Assuming an efficient market, calculate the expected return of the investor's portfolio? (5 marks) b. You recently read an article that contained the following statement: "It is widely accepted that dividend valuation models are an acceptable way of valuing businesses. Modigliani and Miller said that dividends are irrelevant to valuation and so there is inconsistency in the theory and practice." Do you agree with the statement? Critically explain your reasoning. [10 marks Word Limit: 300 words] c. Dumbledore plc is listed on the London Stock Exchange and has recently had a very profitable year, with cash of about 25% of its market capitalization. The directors do not see any investment opportunities post COVID, they made the decision to use this cash to a pay a special dividend to their shareholders. When the directors brought this decision to the other directors, the marketing director chimes in to say, 'We've always been modest dividend payers in the past, so our shareholders would probably welcome a large dividend.' What would you, as the finance director, advise the other directors to do regarding the special dividend? [10 marks; Word Limit: 300 words] [Total 25 marks)