Advanced In the context of capital budgeting, you are required to explain:

(a) the meaning of ‘beta’; (4 marks)

(b) the function of ‘beta’ in the capital asset pricing model; (4 marks)

(c) what one might do to overcome the difficulty that ‘beta’ for a proposed capital expenditure project is not necessarily the same as that for the company as a whole;

(d) the major limitations to the use of the capital asset pricing model for the purposes of

(c) above.