Your team has just been appointed to advice and oversee the Finance Department of a large U.K.-based company (which is either HSBC, TalkTalk or Eon - you decide). Upon arrival, you notice that your predecessor had not really been up-to-date with respect to recent financial innovations. For example, members of the Department tell you that he had a general distrust towards any derivative instruments, and therefore never hedged any existing exposures. In addition, he argued that the firm's cost of capital could be determined through considering how the firm's returns commove with the FTSE 500's returns.