b. If the CAPM approach gives an opposite decision, the key to deciding would be the importance of market imperfections. As indicated earlier, if a company's stock is traded in imperfect markets, if the possibility of insolvency is substantive, and if bankruptcy costs are significant, more reliance should be placed on a total variability approach because it recognizes residual plus systematic risk. If things point in the opposite direction, more reliance should be placed on the CAPM results.