Answer the following two independent questions.

a) New information arriving to the share market can be classified by how wide-spread the news event is. Specifically, the event can be classified as firm-specific, industry-specific, or economy-wide. For each classification, briefly explain why the news event is or is not important to investors. (3 marks)

b) The common shares of Trenton Ltd., which are currently trading at $12.50, paid a dividend of $1.50 per share during the past year. Investment analysts have informed you that the historical growth rate for its common share dividends of 2% is expected to continue for the foreseeable future, that the firms beta is 1.7, and that reasonable estimates for the risk-free rate of return and the expected market return are 3% and 9%, respectively.

Alternatively, the common shares of Bellville Inc. have a current market price of $10 per share and investment analysts have informed you that the share price is expected to be $10.50 in 1 year, that the shares are expected to pay a dividend of $1 per share over the next year, and that their beta is 0.75.

Should you invest in the common shares of Trenton or the common shares of Bellville? Explain and support your answer with calculations. (7 marks)