(a) Efficient market hypothesis (EMH) states that the price of a security (such as a share) accurately reflects the information available. When information arrives, how fast will an information about a share be captured and reflected in the share price depends on the degree of competition among market investors. List and briefly explain, two variations of information.

(b) Modigliani and Miller (1958) outline the most authoritative work on the theory of capital structure in a perfect market setting. However, capital markets are imperfect. With the presence of imperfections, managers must balance the costs of benefits of introducing debt into a company's capital structure. List and briefly explain ONE cost and ONE benefit of debts that must be considered in forming the optimal debt level.

(c) Researchers have shown that the best measure of risk of a security in a large portfolio is the beta () of the security, which is captured in the Capital Asset Pricing Model (CAPM). In your own words, briefly explain what beta is? Interpret the beta of one (1.00) relative to the market.

(d) There are two approaches to estimate cost of equity: CAPM and the dividend growth model. Briefly explain, in your own words, in what situations that dividend growth model may not be appropriate.