What is the primary use of the Capital Asset Pricing Model (CAPM)?

The Capital Asset Pricing Model (CAPM) is primarily used to calculate the required return on equity for an investment based on its systematic risk. This model establishes a relationship between the expected return of an asset and its risk, as measured by beta, which reflects the asset's sensitivity to market movements. The formula for CAPM includes the risk-free rate, the expected market return, and the beta, allowing investors to determine the expected returns that compensate for the risk taken above a risk-free investment.

While debt investments, dividend payout ratios, and overall company profitability may influence financial decision-making, they are not the focus of CAPM. The model specifically addresses equity investments and helps investors gauge whether an asset is potentially undervalued or overvalued based on its expected return aligned with its risk profile. Thus, B is indeed the correct choice as it directly relates to the model's primary application in finance.