Green Dyke Ltd$.$ is considering investing in one of two portfolios of financial investments. The company$$s objective is to reduce risk through diversification and it believes that the return on any individual investment is not correlated with the return on any other investment. The return on market portfolio is estimated to be $14\%$ and the risk$-$free rate is $6\%.$ The amount invested, the expected return, the standard deviation, and betas for each portfolio are given as follows:

Portfolio A:

Investment

Company $1$

Company $2$ Amount invested

$$65$ million

$$35$ million Expected return

$22\%$

$25\%$ Total risk

$10\%$

$8\%$ Equity beta

$1\mathrm{.}1$

$1\mathrm{.}3$

Portfolio B:

Investment

Company $3$

Company $4$ Amount invested

$$50$ million

$$50$ million Expected return

$23\%$

$24\%$ Total risk

$12\%$

$13\%$ Equity beta

$0\mathrm{.}9$

$1\mathrm{.}3$

Required:

$($a$)$ Calculate the expected return and standard deviation of each portfolio.

$[6$ marks$]$

$($b$)$ Estimate the required rate of return on the two portfolios using the Capital Asset Pricing Model, and advise regarding which portfolio should be selected.

$[6$ marks$]$

$($c$)$ Discuss the advantages and disadvantages of utilising Portfolio Theory to assist with portfolio selection.

$[8$ marks$]$

$($d$)$ Evaluate five non$-$ financial factors that should be considered by Green Dyke ltd in deciding whether or not to invest in a new product line.

$[10$ marks$]$