Business Finance

Respond to the questions using thelessons and vocabulary found in the reading.Support your answers with examplesand research and cite your research using the APA format.Start reviewing and responding tothe postings of your classmates as early in the week as possible.Tasks:Answer the following questions:To determine how well an investment is doing, it isimportant to take into account its return and risk. Rational investorsseek to obtain the highest amount of return from an investment with theleast amount of risk. The CAPM and the arbitrage pricing theory arealternative methods of identifying the risk and return relationship in aninvestment or groups of investments. What are the similarities anddifferences between the two models? In your opinion, which model would bemost appropriate for evaluation of a portfolio of investments? Why? Whichmethod would you recommend for a single investment project? Why? Provideyour rationale using examples.When a firm uses debt in its capital structure, it isreferred to as a leveraged firm and this concept is referred to asfinancial leverage. Operating leverage refers to a firm's fixed costs ofproduction. The higher the fixed costs, the greater the degree ofoperating leverage that is being employed. How does the degree of operatingand financial leverage affect the beta of a firm? For a firm justbeginning operations, what recommendations would you make about the use ofdebt in the capital structure? How would these recommendations affect thecompany's beta coefficient and the investors' required rate of return?Would your recommendations change if the firm were a long-establishedoperation? Why or why not?Comment onthe postings of two of your classmates. Do you agree with their position? Whyor why not?