Hampstead Plc. has an investment opportunity. It must invest 10M for a certain payoff next year of 15M following a government contract. Hampstead's assets in place are worth 30M or 60M, with equal probability, and it has 10M shares. Assume that the interest rate is zero and investors are risk neutral. A) Assuming Hampstead can finance the investment with cash, should it go on? (5 marks) B) What if it must issue shares? Should it now go on with the investment? Explain the outcomes both for the new and existing investors. (5 marks) C) Hampstead's shareholders believe that the assets in place are worth 30 or 60, but they think that the probabilities are 25/75%, respectively. The market, however, still believes that both scenarios have equal probabilities. Would your response to B) change? If so, how? Explain. (5 marks) D) Assuming now that the market knows that Hampstead's shareholders know the true value of the assets in place (that is, either 30 or 60M ), would the investment decision change? How would the market react? Explain. (10 marks) (Total: 25 marks)