Firm A sells insurance against the loss of satelites upon take-off. Firm B is a car manufacturer. Which firm carries more systematic risk? Why?

(b) Is it appropriate for a family firm to use CAPM to assess its cost of capital?

(c) A start-up technology firm has never made a profit, and so has never paid any taxes. There is no immediate chance that this situation will change. The firm's cost of debt capital is 4%, and its cost of equity capital is 10%. The firm's chief technology officer notes these figures and remarks "We can maximize the value of the firm by financing ourselves in the debt markets." Is the chief technology officer right? Why, or why not?