7 The directors of Frane plc are considering a project with an expected return of 23 per cent, a beta coefficient of 1.4 and a standard deviation of 40 per cent. The risk-free rate of return is 10 per cent and the risk premium for shares generally has been 5 per cent. (Assume the CAPM applies.) a Explain whether the directors should focus on beta or the standard deviation given that the shareholders are fully diversified. b Is the project attractive to those shareholders? Explain to the directors unfamiliar with the jargon of the CAPM the factors you are taking into account in your recommendation.