$($a$)$ Discuss the implications for firms of asymmetric information

when potential investors cannot distinguish 'good' from 'bad'

firms. Make sure to clearly state the model and notation you

use.

$($b$)$ What is the Lintner's hypothesis? If you believe the Lintner's

hypothesis is true, then by how much do you think a firm will

increase its dividends per share if its earning increase by $1$

per share? Select your answer from the following options, and

explain your choice clearly: $($i$)$ more than $1$; $($ii$)$ exactly $1$;

$($iii$)$ less than $1.$