Aquarius Plc has *** recently been listed on the London Stock Exchange. The company has its core activities in three industries. The activities in industry A represents 50% of the companys value and those activities in industry B and C make up the remaining 30% and 20% of the companys *** value respectively. As the finance director, you are very keen to estimate the companys risk and its required rate of return for capital budgeting. You are given the following additional information. (i) The FTSE 100 index has an average return of 6% and a variance of return of 25% in the last five years. Short-term *** government bonds have had a constant return of 3% over the same period. (ii) The returns on Industry A, B and C have coefficients of correlation of 0.8, 0.75, and 0.5 with the FTSE100 historically. In recent years, their variances of returns have been 36%, 16%, and 9% *** respectively.

Required

(a) Using the information available in the question, estimate the beta for Aquarius Plc. Explain your answer and state any assumptions used. (b) Discuss how you would use the beta value calculated in part (a) above to estimate an appropriate discount rate for future projects undertaken by the company. (c) What reservations do you have about the *** method that you use in part (a) and (b) to estimate appropriate discount rate for future projects?