Provide detailed answers to these questions.

The Arbitrage Pricing Theory (APT) and the Capital Asset Pricing Model (CAPM) have received much attention from practitioners and academicians for use in asset pricing and valuation REQUIRED: Explain the conceptual difference between the Arbitrage Pricing Theory (APT) and Capital Asset Pricing Model (CAPM). (10 marks) (b) The following are the historical returns for the Anita Computer Company Led Year Anita Computer Company Led General Index 37 15 13 -11 14 BUGUN- 11 12 REQUIRED: () Compute the correlation coefficient between Anita Computer Company LTd. And the general index. ( marks) (i) Compute the beta for the Anita Computer Company Led. (2 marks) (Total: 20 marks)KK Lid and KT Lid are two companies in the printing industry. The companies have the same business risk and are almost identical in all respects except for their capital structures and total market values. The companies capital structures are summarised below; KK Lid Sh '000' Ordinary shares (sh. 50 par value) 40.000 Share premium account 90,000 Profit and loss account 733 00 Shareholders' funds 203 010 KK Lid shares are trading at sh.140KT Led Sh '000' Ordinary shares (Sh. 100 per value) 50,000 Share premium account 16,000 Profit and loss account 88.000 Shareholders' funds 154,000 12% debentures (newly issued) 50 000 204,000 KT's ordinary shares are trading at Sh 170 and debentures at Sh. 100. Annual earnings before interest and tax for each company is Sh. 50 million Corporate tax is at the rate of 30% REQUIRED: (a) If you owned 4% of the ordinary shares of KIT Led and you agreed with the arguments of Modigliani and Miller, explain what action you would take to improve your financial position. (b) Estimate by how much your financial position is expected to improve. Personal taxes may be ignored and the assumptions made by Modigliani and Miller may be used. If KK Led was to borrow Sh. 40 million, compute and explain the effect this would have on the company's cost of capital according to Modigliani and Miller? What implications would this suggest for the company's choice of capital structure? (8 marks) (Total: 20 marks)