Capital Asset Pricing Model and Small Market Line

Capital Asset Pricing Model and Small Market Line

Using Professional journals, the Internet, and your textbook readings, respond to the following question in a minimum of 700 words:

• You are the chief financial officer (CFO) of a multi-physician clinic. Do you see weaknesses or strengths in the capital asset pricing model (CAPM)? Explain your response and support it with examples. Include what the small market line (SML) involves.
• Your chief executive officer (CEO) asks you to decide the best option between debt and equity financing. Explain your choice, covering the factors that influence your decision.

Provide reasons for and evidence in support of your responses.

Be sure to cite any relevant resources used in framing your responses. Apply APA standards to cite sources.

Answer Preview

Capital Asset Pricing Model (CAPM) looks into all the undiversifiable and inherent risks that face all the market and are beyond its control. This types of risks are called systemic risks and are characterised by fluctuations…